Individual Voluntary Arrangements (IVAs) are designed to assist any person struggling with an overwhelming debt problem.
But what happens when one of the debts is owed to the Student Loan Company?
When debt repayments become too difficult to afford, often a person will take out further credit to cover the repayments, and thus find their situation worsening.
This is where an Individual Voluntary Arrangement (IVA) can help.
An Individual Voluntary Arrangement (IVA) is a new agreement with existing creditors. Monthly debt repayments are replaced with one monthly contribution into the Individual Voluntary Arrangement (IVA) fund. The contributions to the Individual Voluntary Arrangement (IVA) fund continue for the duration of the Individual Voluntary Arrangement (IVA), normally 60 months, after which time the debts will be considered settled. (If there is any debt not fully repaid through the Individual Voluntary Arrangement (IVA), the creditor concerned will be required to write off the remainder.)
Many graduates find themselves in an impossible position.
Years of studying, training, and exams, all for an opportunity to improve their future earning potential, whilst all the while finding themselves being buried in a mountain of personal debt.
One such debt could be to The Student Loan Company Ltd, for they are the government’s provider of student loans. Student loans are part of the government’s financial support package for students, and are designed to assist students whilst in higher education in the UK.
Many graduates are simply unable to earn their way clear of their debt problems and consider the route of Bankruptcy or an IVA as a method of making a clean financial start.
However, neither bankruptcy nor an IVA are able to clear Student Loan Company debts, (see bottom of page), which leaves many people confused at to what actions they can take to become debt free.
The truth is this - anyone suffering with a severe debt problem should seek advice from a professional IVA adviser, for even though a Bankruptcy or an IVA can no longer discharge the liability to a Student Loan, it doesn’t mean these options cease to be viable.
Indeed, many people will enter into an IVA to deal with the remainder of their personal debts and will still find they have sufficient financial strength left to maintain repayments to their Student Loan.
Student Loans Background.
After the introduction of the Enterprise Act in 2004, (where several amendments were made to the bankruptcy laws, which among other things, reduced the term of a bankruptcy to 12 months.) more and more students recognized the advantages of declaring themselves bankrupt to enable themselves to ‘clean the financial slate’ before commencing with the rest of their lives.
However, due to the sheer amount of graduates opting for the bankruptcy solution, the government made further changes and loans owed to The Student Loan Company were deemed no longer a provable debt in a bankruptcy.
Student Loans Update.
In November 2009, Royal Ascent was given to The Apprenticeships, skills, Children and Learning Act 2009 which, amongst other things, introduced an amendment to The Teaching and Higher Education Act 1998.
This amendment brought a definitive end to the speculation and confusion as to whether a Student Loan can be included in an IVA.
From November 2009 all Student Loans must be excluded from IVA applications.
The amendment states that a Student Loan must now be treated in a similar way as it would be treated in Bankruptcy.
This has the effect of making a Student Loan exempt from the legally binding process of an IVA, essentially ensuring that it will survive any debt write-off, whilst also ensuring that the debt must be paid back, however long that takes.
For more information on Individual Voluntary Arrangements (IVAs), download our free guide “The Truth about IVAs”, or call free on 0800 088 7503 where our specialist team is waiting to answer your questions.
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