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Tackling your debts

How much of your debt could you write-off?

Posted 21 August 2017

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When it comes to writing debt off, there are a few options you can look at. In today’s blog, we look at how an IVA works and how much debt it can write off.

Are you looking for ways to get out of debt? There are some routes out of debt that allow you to write some of your debt off. One of the solutions you can look into is an Individual Voluntary Arrangement (IVA). If you live in Scotland, a Trust Deed is a similar solution that provides a lot of the same benefits.

How does an IVA work?

When you finish an IVA successfully, any remaining debts included in it are written off completely. In some cases, customers get up to 80% of their debts written off using this debt solution, but on average our customers have 60% of their debts written off.

With an IVA you come to a new agreement with your lenders to pay them a smaller, affordable amount each month. You pay this lower amount for five years and you might also have to put extra money into the IVA during this time. For instance, if you earn over your normal amount, you might have to put some of your extra earnings into the IVA.

So an IVA can mean that a large proportion of your debts are written off and your lenders won’t be able to contact you for payment afterwards or take any further legal action against you during your IVA or after it’s finished.

You need to be aware that an IVA will damage your credit history and might make it harder or more expensive to get certain services like a mobile phone contract or tenancy agreement, or borrow money in the future.

Do you qualify?

You’re normally suitable for an IVA if you have unsecured debts of around £5,000 and you can’t pay your debts when they are due, or your debts are worth more than your assets.

IVAs are available whether you’re a homeowner or a tenant and can be a good way for homeowners to sort out their debts as you don’t have to sell your home if you start one, as you might with bankruptcy. If you do own your home, you might have to release equity six months before the IVA ends and put the money into the IVA – or your IVA may be extended for up to another 12 months. 

Are there other ways to write off debt?

There are other ways to get your debt, or part of your debt, written off. Debt Relief Orders and Bankruptcy also provide debt write-off, and in some cases it’s possible to contact your creditors directly and arrange to make a full and final payment which is less than what you owe, if you have a lump sum you can put towards your debts.

Speak to trained debt advisor with the experience to make a recommendation, in order to find out which solution is right for you. You can contact our advisors using the options at the top of the page.

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.