Trust Deed vs IVA

Two of the most popular solutions to resolve debts are the Trust Deed and the IVA. There are specific differences between the Trust Deed vs IVA and it’s vital to know the positives and negatives of each debt solution because it does matter if you’re in debt.

debt-trust-deed-ivaThe Trust Deed is a Scottish only debt solution. The IVA is for people living in the rest of the UK (England, Wales and Northern Ireland).

The Rise of Trust Deeds & IVAs

The insolvency solutions – a Trust Deed or IVA – have become popular throughout the UK in the past 10 years. The solution is a route to resolve debts and also have some debt write off too.

The popularity has grown particularly because of supply and demand; more people demand the solutions because they are in debt and want an alternative to bankruptcy.

However, there has also been greater advertising of Trust Deeds and IVA because of the value in each case.  These debt solutions require an insolvency practitioner to administer and monitor the IVA or Trust Deed. The insolvency practitioner can take thousands of pounds in fees for managing the debt solution over the term of the solution.

Difference Between an IVA and Trust Deed

Other than an IVA being suitable for people living in England, Wales and Northern Ireland and the Trust Deed being a Scotland only solution, there are other differences.

debt-write-offBoth solutions are similar for the person in debt. It’s one monthly payment, for a fixed period of time and at the end any remaining debt is written off. Both the IVA and Trust Deed protects a person from their creditors and ensures no further action can be taken while the debt solution is in operation.

Yet, there are some differences. For example, the solutions are governed by different legislation. This means they work slightly different from each other.

Length of Solution: The time the solution takes to complete will vary between the IVA and Trust Deed. The IVA will typically last for between 5 and 6 years. The Trust Deed will last 3 years, although rules are changing and it’s likely to be 4 years.

Assets: In both solutions assets – house, car etc – must be considered at the end of the solution. If there’s equity then it must be released. In a Trust Deed this can mean selling a house or car, however with the IVA protocol there will be no need to sell a house. Usually if there’s equity, but it can’t be released through a remortgage then the IVA will last for an extra year to cover the equity.

Return to Creditors: The amount that has to be returned to creditors in a Trust Deed is 10% after fees and charges. There used to be a 25% return to creditors in an IVA however now there is no minimum.

Trust Deed vs IVA vs Bankruptcy

women-worry-debtsThe Trust Deed and IVA debt solutions help people avoid entering bankruptcy which has a negative stigma attached to it. The Trust Deed or IVA can be a better solution compared to a bankruptcy because it’s more flexible, however in other instances bankruptcy is best.

Bankruptcy would be the best solution if;

-          You’re unemployed long term and not likely to find employment in 1 year

-          Long term sick. People who receive benefits for being ill cannot be asked to pay anything from this income towards their bankruptcy on a monthly basis. This means the bankruptcy is an ideal solution.

-          You won’t be able to repay your debt within 1 year and you’re receiving pressure from your creditors.

The IVA or Trust Deed is the best debt solution is;

-          You have an asset, like a house or car, and there is some equity in it. The IVA and Trust Deed will generally protect your assets.

-          You’re in paid employment.

-          Your debt is above £10,000

-          You will repay less than the full amount of debt in a 4 (Scotland) or 6 (England, Wales & Northern Ireland) year solution.

Other Debt Solutions

Always remember, there are lots of debt solutions and ways to resolve debts which may not require a formal debt solution, like an IVA, Trust Deed or Bankruptcy.

Seek professional FREE debt advice from a charity before you make any decision.

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John The Bankruptcy Guy

As an ex-bankrupt, John has experienced the highs and lows of credit. It's with this knowledge that he writes Debt Advice Resource - to help others avoid, or navigate out of, the pitfalls of debt.

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