The vast majority of debt solutions are provided or facilitated by private companies, with government involvement being very limited. In the US there are a certain number of federal consolidation loans available, particularly aimed at students with serious debt, but these are to a large extent just replacing a series of smaller debts with one big one. In the UK there are no schemes directly run by the state, but the government did set up a scheme called an Individual Voluntary Arrangement (IVA) in 1986 to provide an alternative to bankruptcy.
The scheme was originally aimed at small businesses and intended to reduce the number that were going bankrupt by providing an alternative debt solution. It has evolved over the years and is now one of the most widely used systems for dealing with serious consumer debt problems in the UK.
The idea of this government debt solution is to make it possible for people in very serious situations to become debt free without the drastic step of filing for bankruptcy. It is a way of wiping out a large part of the debt you owe without the stigma and some of the more serious consequences of becoming bankrupt.
The main difference between this government debt solution and other options such as debt management plans is that an IVA is a formal and legally binding agreement. One of the advantages of this formality is that if you can get 75% if the creditors to agree to setting up the IVA, the remaining creditors have to go along with it even if they object. With a debt management plan you cannot force any creditor to join in who does not want to.
The flipside of this formal aspect is that it is binding on you too, so it is very important that once you start, you stick to the payments. You cannot get out of the agreement just because your circumstances change, as you could with a debt management plan. You would need to make a very good case for getting a reduction in your payments due to a change in circumstances. If your circumstances change for the better and you get some extra money, you will probably be expected to put at least part of that towards your debts.
Overall, however, IVAs definitely have a lot of advantages, particularly when compared to bankruptcy. One of the biggest concerns people have about bankruptcy is that you lose control of all your assets and your home may well be sold off to repay creditors. This is unlikely to happen with an IVA, though the equity in your home may need to be released. The other thing you avoid by using this government debt solution is the stigma that comes with bankruptcy, not least because it is published in the press. An IVA is a private agreement so is not published publicly in that way. Neither will you be barred from certain jobs or from being a company director.
When you set up an IVA you have to make a regular monthly payment towards your debts for the period of the IVA, but at the end of that time any remaining debts are written off. In some cases this can mean up to 75% of your debts are written off. This government debt solution is the only way to deal with debts that are too severe to be tackled using a debt management plan. Debt management plans are a way of paying back everything you owe, whereas in IVA addresses the situation where paying back your debts in full is just impossible.
An IVA has to be set up by an Insolvency Practitioner. To find out whether an IVA is suitable for your situation, and what the payments would be, you need to consult a specialist debt company. The arrangements are only available in the UK so you must find a reputable UK IVA provider. It is best to use recommended companies that are already vetted, and apply to about three different ones, so that you have something to compare.
Read reviews and recommendations for the most reputable IVA UK specialists. K D Garrow has worked as a senior manager with significant financial responsibility for the last twenty years. His website offers free help with debts, including advice on debt consolidation, debt settlement, budgeting, loans and bankruptcy.