Debt Help

If you're paying off huge debts and struggling to make ends meet, there may be a way out of your debt problem - but you need to be aware of the risks.

An Individual Voluntary Arrangement (IVA) allows you to freeze the interest on your debts and often slash the amount you owe to lenders, as long as you don't default on monthly repayments.

If you do fall into arrears, you could lose your home or be forced into bankruptcy as the lenders reclaim the full amount of debt.

Thousands of people have already set up an IVA to reduce their debts to a manageable level.

However it's important that you're armed with the facts before you commit to deal with your debt in this way.

With an IVA an insolvency practitioner negotiates with your debtors on your behalf to reduce your debt to an affordable level.

Most creditors, whether banks or credit card companies, know it's better to get some money back than none.

So if you owe £40,000, for instance, but can only realistically afford to repay £300 a month, you might end up paying back £18,000 over five years, then the debt is wiped. But only if your creditors agree. If you can keep to the repayment schedule, then an IVA can be a way to get out of the vicious spiral.

Crucially, interest is frozen with an IVA. It means that your debt won't grow as you try to repay it. However, as soon as you sign up for an IVA, you are not be able to borrow any more money, which means it is essential you keep to your financial plan.

If you don't meet repayments every month, lenders will almost certainly take legal action for the whole amount owed, not the smaller amount negotiated through the IVA.

If you're having problems making payments on your debts, there are also a number of companies known as insolvency practitioners that can help you set up an IVA.

If you are a homeowner struggling with arrears or other debts, there are some companies offering sell and rent back home schemes. They buy your home at a discount to the market value with the advantage of offering a quick sale and the ability for you to remain in your home as a tenant.

Alternatively contact either the Consumer Credit Counselling Service on 0800 138 1111, National Debtline on 0808 808 4000 or your local Citizens Advice Bureau, to talk through your options.