A comparative study of debt management, IVA and bankruptcy

Global credit crisis and economic meltdown have created a precarious situation before Britons. Pink slips and instability in job market has squeezed monthly income. Credit crunch is a mighty barrier before approval of fresh credit. Hence, several case of debt snowballing leading to repossession have taken place during last two years. However, repossession is an extreme case and you can avoid it by resorting to a monthly budget-friendly repayment plan. To help you in this regard, there are several financial tools like debt management, IVA and bankruptcy. This article provides a comparative study among these three tools.

Every financial situation is unique in its dynamics. Hence, to get rid of the situation you need a tailor made solution. Debt management or debt consolidation is the process of converting all your debt burden to a single and affordable loan plan. IVA or individual voluntary arrangement is a legal binding agreement that leads to a budget friendly monthly repayment. In bankruptcy, you are assets are fairly shared among your lenders to give you relief from debt burden.

Debt Management vs. IVA

Debt management is an effective financial tool while your debt burden consists of unsecured loans and credit card bills. To get rid of these debts, lenders provide you a secured loan. That means, to pay off loans you take another loan. The new loan has collateral clause and will lead to repossession if you can not pay back on time. In case of IVA you do not need to take another loan. A monthly installment is prepared after calculating your debt burden, monthly income and expenditure.

Repayment period in debt management is short term in nature. During this period you have to pay back the entire loan amount with interest. On the contrary, repayment tenure in case of IVA is five years. After this period you are declared debt free even if you have not repaid the entire debt amount.

Debt management is a mutual agreement and it is not legal binding. So lenders can refuse to abide by it at any point of time. IVA is a legal binding agreement and insolvency practitioner ensures that your property is not repossessed or you are not harassed during this tenure.

IVA vs. bankruptcy

<a onClick="javascript:pageTracker._trackPageview('/outgoing/article_exit_link');" href=http://www.clearinsolvency.co.uk/bankruptcy.php>bankruptcy</a> is for people facing with acute financial difficulty and inability to repay the loan amount. Here, the asset of the borrower is distributed among the lenders. But, in case of IVA no such distribution takes place. Bankruptcy cases are publicized in the local newspapers. This publicity might create social embarrassments too. On the contrary, IVA is highly confidential. People filing for bankruptcy are debarred from fresh credit for certain years. But, while under IVA tenure, you can raise fresh credits too.

Choosing your plan depends upon your financial situation. While choosing a plan, make sure to have all information regarding its pros and cons. You can take the help of internet to gather relevant information related to debt management, IVA and bankruptcy.