Debt Information: What is an IVA?

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Many people in the UK have debt problems. Some in the form of mortgages, others credit cards. Paying back the amount borrowed can be difficult if personal circumstances change, with interest added on, it can seem like there’s no way out.

During times like this, an IVA may seem like the solution to put things right or find a way to tackle the issues. An individual voluntary arrangement is a formal agreement which is binding upon the borrower and the creditor.  Governed by the Insolvency Act of 1986, the agreement allows the individual to pay back the money owed at an affordable cost. During this time, creditors will not be able to contact the individual who will be protected from any legal action or in some cases bankruptcy. Any interest which was set out in the original agreement will also be frozen.

In order to be eligible for IVA, the individual must have debts in excess of £12,500. This amount must be between two or more creditors. A regular household income must also be shown. Those who meet the criteria and are struggling to keep up with instalments to the creditor can apply for an IVA.

After the agreement is made, monthly payments will be calculated to be paid each month. An IVA is the amount of income minus necessary living costs. This allows the individual to pay back what they can afford rather than what is being demanded by the creditor.

There are many advantages to setting up this agreement, for example in most cases the individual can be debt free within 5 years with one single monthly payment.  Individuals have a legally binding contract which is a form of protection from court orders and also, as already mentioned, interest will be frozen. Telephone calls and payment demands also stop – for those struggling with the stress of debt this provides peace of mind that is priceless.

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FTC Debt Settlement Rules Safeguard Consumers From Malpractices

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Debt issues have become a regular feature in the US. People have been struggling to pay off debt. The poorly performing economy has inflicted a negative effect on their livelihoods, which has made things even worse. The past few years have seen a rise in the number of debt settlement companies offering debt relief to the needy lot. Their solutions promised an easy and faster way out of debt. Unfortunately, things weren’t working out as they were meant to. A majority of the debt settlement companies were reported to be hiding the nature of their plans and proposals from their clients. This led to the formation and implementation of some ground rules by the Federal Trade Commission (FTC) in order to rein in the illegal and dangerous practices adopted by these companies in the name of service to the debt-ridden masses.

People have been complaining about debt settlement companies not fulfilling their promises. They had their faith in these companies, but didn’t find the assistance necessary to reduce debt and avoid bankruptcy filings. They paid a healthy sum of money to these companies, but could buy nothing but the blank assurance of faster debt relief. As if this wasn’t enough, they found working with the debt settlement companies to be harmful to their credit scores. Their credit history reflected negatively, which was a strong blow to their financial future.

Although debtors received suggestions against resorting to debt settlement companies, they continued to seek help from them. Quite obviously, the damaging consequences were for them to bear. Debtors would have saved themselves thousands of dollars had they filed for bankruptcy. Frustrated with their situations, debtors lodged a series of complaints against the debt settlement companies to the Better Business Bureau (BBB) and the FTC. This pushed up the number of complaints by 18 percent between the years 2008 and 2009.

Rescue efforts by the FTC for consumers

The FTC laid out new rules that will make the debt settlement companies show honesty with their proposals to customers. The following are the restrictions imposed on the debt settlement companies:

No more lies – The companies can’t lie to their customers about anything in any way. They have to provide the debt solutions if that’s what they promise to do.

Transparency in costs – Customers are to be provided with written documents stating the estimate of the expenditures involved.

Specific timeframe – The companies must state the timeframe within which the customers could get rid of or see reduction in debt.

Negative effects on FICO or credit scores – Consumers should be informed about anything that could inflict negativity in their credit report and reduce debt.

Aside from the aforesaid rules, consumers have been equipped with the right to stop paying the debt settlement companies till they get to see the desired results. Consumers have been misled by debt consultants. In their attempt to avoid filing for bankruptcy, they end up in higher debts. This also causes a downslide in their credit scores.

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