If you’re considering getting an individual voluntary arrangement, you might be considering the pros and cons of one. There are many reasons you may want to enter an IVA, and there are some benefits to using these methods of meeting your payments during times of financial strife. Here are some of the benefits associated with IVA use.
An Alternative To Bankruptcy
An IVA gives you an alternative to having to file for bankruptcy when you are having difficulty meeting your monthly financial obligations. Coming to an IVA agreement with an insolvency practitioner means that your creditors will not harass you in the future. When you file for bankruptcy, your creditors may attempt to continue to collect payments until you’re officially declared bankrupt. They might even attempt to trick you into making payments after you’ve declared bankruptcy (or sequestration in Scotland), because they want to recoup some of their losses. This is because bankruptcy clears your debt, whereas an IVA allows creditors to still receive a portion of the balance owing.
If you live in Scotland, you won’t have an IVA option available to you, but you will be able to apply for a Protected Trust Deed or Scottish Trust Deed. A Scottish Trust Deed can sometimes have a lower requirement fulfillment than that of an IVA. The professionals at https://www.scottishtrustdeed.co.uk/ say that you only need to have debt in the range of £5,000 owing to one creditor.
Reduces Your Stress
One of the major benefits of coming to terms with your debt with a financial document is the relief you’ll feel. Because you are still maintaining some form of payment to creditors, you might even feel like you’re doing your part to pay back your debts. Financial stress can lead to insomnia, anxiety, and increasing levels of depression. By tackling the problem head on you can strive towards living your life and enjoying the most out of it.
Reducing The Amount Owed
Establishing an IVA means that you were unable to meet payments that your creditors required of you. You’re unable to meet these payments an insolvency practitioner will mediate that you pay a lower amount every month. This means that your total debts owed will be reduced, but it still means you will have to pay back a sizable portion. If you have borrowed money, you need to work at paying it back in some way, shape or form if it’s within your financial ability. Sometimes our heads can get wrapped around the large value that we owe, and by reducing the total amount owed we can feel less worried.
Less Stigma
There’s a certain stigma associated with bankruptcy among most people. We view claiming bankruptcy as a last resort, and we don’t want people to view us as irresponsible because we needed to declare bankruptcy. An IVA might not be as noticeable to people in your day to day life, and you’re still making payments to the companies that you owe. Some individuals may not even know what an IVA is and won’t be able to stigmatize. People should not frown upon others with financial difficulties, but if it’s something you’re concerned about an IVA can be a solution.
Teaching You How To Budget
While bankruptcy is more complex than just having debts removed, it doesn’t really result in a learning curve that prevents bad financial habits. As IVA’s are agreed over a period of five to six years, you’ll be required to budget and train yourself out of bad habits. Even though an insolvency practitioner mediates what you’ll end up owing and paying to your creditors, you’ll still be paying back as much as you can afford. This might make things a little more uncomfortable, but you’ll develop the skills needed to allocate your funds where necessary. It’s still much better than having to attempt to meet financial demands you can’t meet.
An IVA might be more beneficial to enter into than having to result in bankruptcy for many people. It’s a great way to remove concern about creditors harassing you, while still developing the skills needed to budget. Developing these skills means you’ll be less likely to fall into bad financial habits that may have created the situation in the first place. IVA’s can reduce the amount of debt that you owe and make the amount owing a much more tolerable amount. If you find yourself currently in a situation where you’re considering an IVA, the best thing you can do is speak to a financial advisor to discover what your options are.