According to a recent report by the Citizens Advice Bureau (CAB), a third of all enquiries relate to financial difficulties. The average CAB client had personal debts amounting to £16,971 in 2008 which is more than two-thirds higher than in 2001.
Citizens Advice Bureau (CAB) clients are trying to find out how to become debt free. Is an Individual Voluntary Arrangement (IVA) the right debt solution? Living debt free may be possible for many home owners with financial difficulties in as little as 60 months.
What is an Individual Voluntary Arrangement?
An Individual Voluntary Arrangement (IVA) is a legally binding debt solution for home owners struggling with serious personal debt over £15,000. Any debtor that is wondering how to become debt free could achieve this objective in just 60 months with an Individual Voluntary Arrangement. An IVA represents the most viable alternative to personal bankruptcy for debtors that wish to protect the family home.
How to Become Debt Free with an Individual Voluntary Arrangement
- Personal information. The Insolvency Practitioner requires a statement declaring how any personal debts were accrued. A breakdown of personal finances will also be required, indicating how much can be contributed to the Individual Voluntary Arrangement (IVA). Any offer will need to be greater than 25p in the pound, excluding the Insolvency Practitioner’s fees (up to £7,000);
- Formal proposal. Based on the information provided, the Insolvency Practitioner will construct the fundamentals of an Individual Voluntary Arrangement. This will need to be signed by the debtor and witnessed by a solicitor or a commissioner for oaths. A copy will be sent out to all creditors. An interim order will be taken out to prevent creditor harassment;
- The vote. If 75% of creditors, in terms of value, vote in favour of the Individual Voluntary Arrangement it will be legally binding. Provided a debtor keeps up with monthly repayments, living debt free will soon become a reality;
- Monthly payments. The terms of the Individual Voluntary Arrangement requires a debtor to make a pre-agreed monthly payment to an Insolvency Practitioner for a period of 60 months;
- Annual reviews. The Insolvency Practitioner will request income and expenditure details every 12 months. This information is used to assess whether additional money can be contributed towards the Individual Voluntary Arrangement;
- Certificate of completion. Once the final payment has been made, the Insolvency Practitioner will issue a certificate of completion. It is the responsibility of the individual to send a copy to credit reference agencies. Those that were wondering how to become debt free will now have achieved this reality as any remaining personal debts are now written-off.
Working out how to become debt free seems like an insurmountable obstacle. However, an Individual Voluntary Arrangement (IVA) makes this possible for home owners with debts over £15,000. Those with more modest financial difficulties may wish to pursue an alternative debt solution, such as a debt management plan, to rid themselves of high APR personal debt.