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Bank charges: IVA has advantages for those in debt

For people struggling with debt and increased bank charges as a result of slipping into unauthorised overdrafts, IVAs offer certain benefits over other kinds of insolvency options.

According to Stuart Carmichael, director of the Debt Support Trust, this is because IVAs allow people to pay a percentage of their debt, with the amount usually pre-agreed between IVA specialists and a person's debtors.

"Both an IVA and a bankruptcy have a six-year note put in your credit file," he explained.

 "The difference really is under bankruptcy, you're paying back very little on your debts. At least on an IVA you're repaying what you can," he said. "It's almost seen as the right thing to do, if you can repay."

Mr Carmichael added that the other benefit of an IVA, compared to a debt management plan, is that it is a formal agreement. Debt management plans are informal meaning that they can last as long as ten years, with no guarantee that the creditor will stick to the agreement.

Meanwhile, Paul Crayston, media officer for the Money Advice Trust, recommended that people with debt problems set themselves a personal budget to help limit spending and understand exactly where their money goes.

John Fieldman

Having worked in the city for 19 years, John's main focus is interest rates and corporate finance.ADNFCR-2776-ID-800583821-ADNFCR

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