I had been reading the news today, and thought I would strike up an intellectual conversation with a friend, so I started by saying “Have you head about the insolvency high?”, to which they replied “Is that something to do with the effects of sniffing glue and lighter fluid?”!!! So I then had to explain that insolvency was being unable to pay your debtors, and basically declaring yourself bankrupt. At that point I stopped talking about the news that I had heard, and thought I would share it on here for those who may live in a world without the BBC, or ITV, or 24hour Sky News!

So, the news that has recently come to light is that in 2010, personal insolvency within the UK hit a high for the first time since 1960. The Insolvency Service has advised us that it has risen by 0.7% on 2009.

So just how may people were declared insolvent last year? Well, the figure is 135,089 – which is enough people to fill the new Wembley Stadium one and a half times! May or may not seem like many, given the population of the UK, but that is alot of families to have had their lives effected by money last year. The stress, the arguments, the cutting out of treats etc etc.

There are three forms of insolvency which make up the numbers we have seen above.

• Bankruptcy: The traditional way of escaping overwhelming debt. Ends after one year, but you are likely to lose all your assets including your house to pay something to the creditors
• Debt Relief Orders: Introduced in April 2009, these allow consumers with debts of less than £15,000 and minimal assets or surplus income to write off debts without a full-blown bankruptcy
• Individual voluntary arrangement (IVA): A deal between you and your creditors, overseen by an insolvency practitioner. Less stigma, less chance of losing your home, but involves paying some of your debts in one go or over a number of years

So what can you do to avoid adding to the 2011 insolvency figures?

Well, there are companies that can help you with your debts such as The Money Advice Group. MoneyAdviceGroup.co.uk offer immediate UK debt solutions from Debt Management, IVAs and Debt Consolidation. They only employ experienced debt advisers, and have helped thousands of clients with financial difficulties regain control of there finances. So, start by having a look at their website to see if they can help you, and whether their service suits your needs.

If they aren’t what you are looking for then there are more companies out there that can help, such as Debt Line who offer the only fully online debt management service in the UK. They are currently dealing with over £215,000,000 worth of the UK’s debt for more than 16,000 customers and their online business is rapidly growing.

Debt management means that Debt Line’s clients stop getting creditor hassle, have a freeze on their interest and charges on their accounts and can relax knowing that all of their debts are being dealt with for them. They ensure that their customers only pay what they can afford leaving them with more money every month and no more struggling.

Of course, one thing to be aware of is that personal insolvency does effect your chances of getting credit in the future. It’s important that you rebuild your credit score.

If you have first hand experience of having to declare yourself bankrupt, or partaking in an IVA then please share below.

Individual Voluntary Arrangement can help you get out of debt

If you have incurred debt and are looking for debt solution, you can take help of individual voluntary arrangement (IVA). There are many organizations that can help you with debt reduction and also help your finances stay steady. It’s completely a voluntary option and cannot be forced on you.

What is an IVA?

An IVA is a legal binding between you and your creditor and you agree to make single monthly payment for 5 years. Apart from the payments you can make, the rest of your debt amount is cancelled by the creditor. This is a legal contract and during the agreement, the creditor cannot add any more interest rate or any other charges.

In the IVA, you still have to make single monthly payments but you make the payments which you’ll be able to manage and not more than that. But you must make sure that you follow the rules of the IVA and not fall behind in your payments. If you fail to make regular payments, you may even have to face bankruptcy or may have to pay full outstanding balance as per the creditors.

What are the advantages of IVA?

It completely depends on you when you agree to an IVA. There are quite a number of advantages of paying your debt according to this agreement. Take a look at the advantages of IVA:

1.You get rid of debt after few years.
2.You pay the amount that you can pay and not more than that. The rest of your debt payment is cancelled by the creditor.
3.Singe monthly payment is required in an IVA.
4.Your house and other assets are protected in an IVA and your unsecured creditors cannot ask you to sell off your house.
5.The interest payments are stopped as per the law.
6.You’re not harassed by the creditors for the debt payment.

What are the disadvantages of IVA?

Apart from the advantages, there are also certain disadvantages of this agreement. Check out the disadvantages of getting into this agreement:

1.If you default in your debt payments, it may result in bankruptcy.
2.The equity of your house goes to your creditors. This can be done by extending your mortgage payments toward the end of the IVA. You can also extend your IVA payments for the next 12 months.
3.The creditors may not agree to this payment.
4.The credit rating suffers a lot and the credit score remains low for one year after the IVA.

If you want to go into this agreement to pay off your debt, you must consider all the options before you agree to this legal contract. You do pay off your debts but your credit score suffers and you also need to release your equity to the creditor. But according to the requirement of IVA, you may not be required to sell your house.

Author’s Bio: M.J. is a contributory writer associated with some financial communities and has written several articles for various financial websites. She holds her expertise in the debt industry and has made significant contribution through her various articles.