If you’re feeling overwhelmed by debt, you’re definitely not alone. A recent study by the Insolvency Service has shed some light on why it’s super important to seek impartial debt advice before getting an Individual Voluntary Arrangement (IVA).
An IVA is a formal agreement with your creditors, designed to help you repay some or all your debts, over five or six years.
Interest will be frozen on your debts during this time, but your IVA provider will usually charge fees for their service. Making reduced payments can make debt more manageable, but it will affect your credit rating.
60% of the 310 IVAs that were looked at showed signs of poor practice. Here are some of the issues that were uncovered:
Whether you’re eligible for an IVA will depend on your individual circumstances and the provider you use. As a rule of thumb, you need to:
Claire Hardgrave, Head of Insolvency Practitioner Regulation at The Insolvency Service, put it perfectly: “While IVAs can work well for many, if an IVA is unsuitable it can leave people struggling with their household budget, being in debt for longer, or even taking on more debt to make their IVA payments.”
No, Insolvency Practitioners can’t advise you about other debt solutions that could be a better fit for you. They are only licenced to provide IVAs.
An IVA can be a useful way to regain control over your finances, but you won’t know if it’s the right choice for you without proper debt advice.
Anna Hall from the Money and Pensions Service emphasises how beneficial this is: "A debt adviser will treat everything you say in confidence, never judge you, and will suggest ways of dealing with debts that you might not know about."
So, before choosing a debt solution, make sure you understand all your options first.
In light of the research findings, the Insolvency Service say they’re working with industry regulators to ensure that people struggling with debt get the best advice possible. They’re planning to:
You can get free, impartial advice from: Citizens Advice, Money Helper, Money Wellness, National Debtline or StepChange.
Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.
Adele is a personal finance writer with more than 10 years in the finance industry behind her. She writes clear and engaging guides on all things loans for Ocean, as well as contributing blogs to help people understand their options when it comes to money.
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