Over the last three years, consumer debt has grown from being unsustainable to outright scary. In the United States, when averaged across every household and individual, consumer debt totals over $8,000 for everyone in the country. In the UK, figures aren’t much better – the standard consumer debt is over £9,000 per household – or almost £60,000 per household once mortgages and property-related debt is taken into account.
The world’s reliance on debt, particularly the first world’s reliance on debt, has lead to a unique paradox. The world’s most wealthy countries are populated by people significantly more heavily indebted than those in developing nations. Despite the relative economic prosperity, the first world is often paralyzed by debt and consumer spending.
Then there’s the heavily indebted, sometimes referred to as crisis borrowers. With the financial crisis still hitting hard, a lot of borrowers who thought they had the financial security of full time employment are quickly realizing that they don’t. As work dries up, so does income, and many borrowers are left with no realistic way to repay and keep up with their loans.
Normally, this would lead to eventual bankruptcy. However, with the range of different debt management options available today, many borrowers are looking at alternative methods for taking care of their debt. One such method is through an IVA. Known as an individual voluntary agreement, an IVA is a government approved debt resolution method.
While bankruptcy proceedings typically attract public attention and subsequently impose some very tight financial and personal limitations, IVA debt solutions are significantly less limiting, vastly more private, and designed to improve the lives of those with unpayable debt – not limit them. Under the right circumstances, an IVA can lead to a significant debt write-off; some IVA advice firms have seen up to 75% of users’ debts written off under an IVA.
Of course, that’s not to say that an IVA will clear away all debt with no consequences. While offering an attractive alternative to bankruptcy, IVAs still impose some restrictions on borrowers. There are minimum monthly payment amounts, long-term payment plans – some of which can span over five years, and a higher level of repayment than through bankruptcy.
However, all this is weighed up against the fact that IVA users are generally completely debt free within five years. A completely non-public agreement, IVAs allow people to preserve their professional image and reputation, avoid the issues associated with a public bankruptcy, and still hold a standard professional or corporate position. Debt is about trade-offs, and for their relatively small downsides, IVAs are one of the most borrower-friendly repayment options available.
Sources (for debt stats): http://www.money-zine.com/Financial-Planning/Debt-Consolidation/Consumer-Debt-Statistics/