More often than not, individuals in dire financial distress can avoid bankruptcy simply by considering any other credit solution. Such alternatives include Individual Voluntary Arrangements (IVAs), debt management and negotiation, and debt consolidation.
Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is a credit solution that serves as a popular bankruptcy alternative. It involves a formal agreement between debtors and their creditors made through an insolvency practitioner. Arrangements are typically flexible and are based on the debtor’s capacity to pay. Generally, through such arrangements, debtors will be left to pay only a percentage of what they owe and interest and debt charges are frozen.
While its nature is quite similar to bankruptcy, an Individual Voluntary Arrangement gives debtors more control over how their debts will be settled as well as how their assets will be allocated. In many cases, individuals who pursue IVAs will be able to keep specific assets, including their homes. Furthermore, IVAs cost less because there are fewer and lower fees involved.
Debt Management and Negotiation
The development of debt management plans also serves to be an excellent credit solution to uncontrollable debt. This is typically a good option for those who have trouble with unsecured debts including those accumulated through personal loans and credit cards.
Through this alternative, debtors typically seek the help of finance experts such as consumer credit counselors in order to come up with a debt repayment plan that suits their specific situation. Upon developing a suitable plan, consumer credit counselors or debt management companies negotiate with creditors on behalf of their clients. If successful, debtors are then left with debt management plans that are more manageable.
Debt consolidation involves taking out a loan to pay off another loan or many other loans. While this can be done through banks, it is often done through debt consolidation companies. Through this option, debtors can cover unsecured loans by taking another unsecured loan but it is often more beneficial to cover unsecured loans through secured loans because of the difference in interest rates.
Typically, debt consolidation is done to gain lower interest rates on the total amount of debt. Sometimes, debtors can also gain fixed interest rates through this option. An additional benefit to this bankruptcy alternative is that debtors need only to make one monthly payment to one company rather than several monthly payments to several creditors.
There are a great many options available to debtors in financial distress. Often, such people will find bankruptcy alternatives to be very beneficial. If they have the capacity to pay, they should seek the advice of a consumer credit counselor or any other professional in the field of finance. Such experts will be able to help them find the best credit solution for their specific debt situation.