Those with financial hardships who were relying on the equity in their property to complete their debt agreements are facing renewed hardship as they find there are little or no funds to call on.

IVA.com says it is now taking calls from worried debtors who are approaching year four of their Individual Voluntary Arrangements when the terms of their contract state that they are obliged to release equity from their property – but the property slump has drained those resources dry.

For many, the only option on the table is to extend the IVA for another year to a total of six – a grim prospect after four years of living on a very tight budget.

Terry Balfour, director of IVA.com says: “When property prices were buoyant the strategy of using equity to fulfil the terms of the contract was a viable option for many people signing up to an IVA. But since then the unforeseen drop in house prices has removed this vital safety net for many and they face renewed misery just at the time when they thought the end of their arduous journey was in sight.”

If you are in a tricky situation, you need to talk to your mortgage adviser. A good adviser will know the best way to protect their client’s mortgage whilst fulfilling the demands of the creditors.

Balfour says: “They may suggest switching to an interest only deal to free up funds for a higher monthly repayment. This will make them a more reliable proposal to creditors and increases their chances of seeing the deal through to completion.”

Debt management is a booming business and there are a great many companies offering their services, but it cannot be stressed how important it is for people to choose carefully. The pressure of unmanageable debt makes people very vulnerable and it can cloud their ability to judge. It’s just not worth signing up for something that isn’t the most suitable vehicle just because it sounds like the easiest, quickest way out. You need to talk to a professional, with credentials.

Balfour adds: “The effects of the property slump on debt solution strategies should be a lesson to all concerned that nothing can be taken for granted and the best insolvency practitioners will know this. Choosing the best adviser, based on recommendation and research, is absolutely vital if people are to deal with their debts effectively. The wrong choice could see them suffer for longer and ultimately, lose everything.”

SOURCE: IVA.com, 06/11/09

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