If it looks too good to be true – beware!

During these difficult times with prices soaring and the general cost of living rising, many people are getting into debt and are looking for any option to help them out.

If you use social media, you have probably started to see posts appearing offering a way out of debt. ‘Get rid of up to 90% of your debt’ and ‘A new government scheme can write off the majority of your debt’ are now becoming commonplace but how trustworthy are they and what is this ‘new government scheme’?

The majority of these get out of debt schemes being advertised usually relate to a debt option called an Individual Voluntary Arrangement or IVA for short.

So, what is an IVA? Is it a new government scheme and is it right for you?

An IVA is one of several insolvency options that have been around for years, others you may be more familiar with include Bankruptcy and Debt Relief Orders.

An IVA ‘can’ be a good option, but this is mainly for people who wish to enter an insolvency option but also want to protect their property if they have expensive vehicles, a mortgaged property or they are a homeowner. An IVA also involves paying a monthly amount of at least £80 for a period of 5-6 years.

More recently these adverts are being targeted at people who do not have any assets, do not own a house or mortgaged property, and have limited income through benefits or low paid jobs.

Any provider of free debt advice would explain all the different debt options to you and which options are unsuitable or to avoid. The companies behind the adverts do not do this, and often their main purpose is to sell an IVA to you regardless of whether it is the right option for you, as they make a profit.

What happens when someone signs up for an IVA?

There is a fee for being in an IVA which can be up to a few thousand pounds. A reputable provider would spread this fee across the 60 or 72 months of the IVA and include it in your payments, however, a lot of the companies who advertise do something called ‘front loading’ of their fees. This means that any payments you make go to pay off their fees before any of your payments go to the creditors you owe money to. It’s important to note that in this instance if you fail on your IVA then you could find that you’ve only covered the provider’s fees and still owe all the money you were in debt for at the start of the IVA.

If you are worried about being in debt, there is plenty of free advice available to you. Here you will be advised of all the options available to you, to help you choose the right one.

Free debt advice is available from:
Citizens Advice Cheshire West - Tel: 0808 278 7806
Pennysmart - Tel: 01244 651210

Live Well Cheshire West: Debt advice