How do government debt help schemes work with IVA?

government debt

What if there is a way to write off your unsecured debts while protecting your valuable assets like your car and house? If you are in the UK, there is an ultimate way to make your debt payments effectively. 

Have you heard of the government IVA scheme? Or, about debt management companies promoting various government debt help schemes? Such projects promise the debtors to help get rid of their debts via different practical insolvency debt measures. The most popular debt measure prevailing in the UK at this point is the Individual Voluntary Arrangement (IVA). The government IVA scheme was introducing in Insolvency Act 1986 as an alternative debt solution to bankruptcy. 

Stepchange IVA is a part of the debt solutions approved by the government to help people get rid of their debts over time. But you see, any formal debt solution such as IVA is only part of various government debt help schemes. They are not actually provided nor managed by the UK government to help the citizens. Debt management companies offer the government IVA scheme since they are a form of the UK’s statute.

When you apply for an IVA, you need the assistance of an Insolvency Practitioner (IP) to get your IVA application sorted by an authorized IVA service provider.  

Since getting into formal debt solutions has implications for your life and debt repayment plan, you must obtain proper debt advice or IVA advice from a trusted entity like StepChange debt charity to gain insight into various available government debt help schemes. 

Government debt help scheme

The UK government has introduced a ton of debt solutions and insolvency forms as a part of the UK’s statute on government debt help schemes. Besides the popular government IVA scheme, you also have other options if an IVA is not suitable for you. Those government debt help schemes include Protected Trust Deed, Debt Relief Order (DRO), Debt Arrangement Schemes (DAS), to name a few. Thus, getting free and impartial debt advice from a professional debt advisor is essential to confirm if entering into a government IVA scheme is correct. 

Now, you must understand that the government IVA scheme is a formal debt measure, not an informal debt solution like the Stepchange Debt Management Plan (DMP). There are legal frameworks attaching to the government IVA scheme. So, when the insolvency practitioner prepares your debt repayment plan, you must adhere to the terms and monthly payment of the IVA proposal until it ends. Likewise, the creditors includes in the debt repayment plan are also legally bound to the IVA plan. Breach of IVA terms and IVA contributions could result in you having to appear for the court hearing. Your IVA may also fail. 

I assume that now you have understood the context of government debt help schemes. And that government IVA scheme is provided and managed by an authorized debt management company or IVA service provider rather than regulated by the UK government themselves. Speaking of IVAs, we shall now learn how IVA works and how it would benefit you as a government debt help to manage your debts. 

Besides the government IVA scheme, the UK government, at this point, has also introduced a formal debt relief program offered by StepChange debt charity known as the Debt Respite Scheme. But it is popularly called the Breathings Space Scheme by UK citizens. If you are granting this government debt relief program, you will get temporary relief from creditors’ pressure to repay debts. The creditors have to oblige and freeze the debt charges and interest rates. And old any enforcement action against the debtor. During this time, you must carefully assess and devise your debt management plan to repay your debts over time. 

Individual Voluntary Arrangement (IVA)

First off, IVA is a legit government debt help scheme as it is a formal debt solution. It is a bankruptcy alternative to write off your debts. Nonetheless, an IVA, short for Individual Voluntary Arrangement, is a standard insolvency measure whereby you (the debtor). And the ones you owe money to (the creditors) are bound by a legal contract. In this government IVA scheme, the licensed insolvency practitioner works out an affordable debt repayment plan to manage your debt payout. This legal agreement typically lasts for four to five years at most. After that, if you have any debt pending, the creditors have to write them off. 

However, to apply for the government IVA scheme, you must qualify the essential criteria of the plan. Your debt advisor can help you determine if you are eligible or not after assessing your situation. The government IVA scheme covers most of your unsecured debts, including loans & overdrafts, benefit overpayments, credit cards, council tax, court judgment debts, catalogues, utility arrears, etc.  

Workings of an IVA 

As you apply for this government IVA scheme, the insolvency practitioner is task to act on your behalf. They work out your debt repayment plan and prepare a satisfactory IVA proposal which they later present to the creditors expecting their approval for the formal debt management plan. Here, the insolvency practitioners are regulated by another independent professional body like Insolvency Practitioners Association (IPA). In contrast, the government IVA scheme is administeres under the IVA service provider or a debt management company. 

Depending on the debtor’s financial condition during the IVA term, the format is often flexible to changes. These changes in the IVA terms and debt repayment plan factor with changes in the debtor’s income, expenditure, etc. 

Benefits of the government IVA scheme

Every formal debt solution has its pros and cons. The government IVA scheme also has significant benefits and reasons why it might be the right choice to get rid of your debts. 

  • IVA enables a reduced debt repayment plan to pay off your debts affordably as long as the IVA lasts. 
  • IVA is a substitute solution for bankruptcy. That’s why it is a better solution than filing for bankruptcy which has severe implications on various aspects.
  • IVA helps safeguard your house, cars, and other assets from being sold off to raise money to covers the debt. 
  • The IVA terms usually require the creditors to freeze your debt interest and charges. They are also prohibites from taking additional enforcement action to receive your debts. 
  • IVA is a reasonable government debt help scheme that the IP can set up as per your financial situation. Your debts, and your capacity to repay on time. 

By the end of your government IVA scheme, you can be a debt-free person. And take the necessary steps to improve your finances and credit score in the future. For any help to enter into an IVA, seek impartial debt advice. 

 

By Arslan Shah

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