Being in debt can be worrying for anyone, and keeping up with repayments can be hard at the best of times. But when the debts become unmanageable, it can become a major problem.

However, there are various debt solutions that can help with different kinds of debt. A brief look at just two of them:

IVA (Individual Voluntary Arrangement)

An IVA is a formal, legally binding agreement between an individual and their unsecured creditors, in which the individual is required to make monthly payments to their IP (Insolvency Practitioner) based on how much they can realistically afford once they've taken their essential expenditure (mortgage/rent payments, utility bills, food, essential transport costs, etc.) into account.

The creditors, in turn, will agree to write off the portion of debt that the individual can't repay during the course of the IVA (normally five years).

In general, an IVA would only be suitable for someone who has a high level of unsecured debt that they can't afford to repay, but who can commit to making regular reduced monthly payments.

Before an IVA can begin, voting creditors who collectively 'own' 75% or more of the individual's debt have to agree to the terms laid down in the IVA proposal. The proposal, drawn up by the borrower and their IP, will detail how the individual plans to repay the agreed portion of their debt.

When the IVA begins, the individual will start making payments to their IP, who will subsequently distribute funds amongst the creditors according to how much the individual owes each of them (this is called a pro rata payment). If they're a homeowner, the individual may also be required to release equity from their property in the final year of the IVA.

In most cases, an IVA will last for five years, and after it has come to a successful conclusion, any outstanding unsecured debt will be written off - the individual will be legally debt free (as far as their unsecured debts are concerned).

It is important to note that when someone enters an IVA, it will appear on their credit rating, and make obtaining further credit harder and/or more expensive for the six years it's on there.

Debt consolidation loan

A debt consolidation loan isn't suitable for people who are really struggling to keep up with their debt repayments and/or don't think they'll ever be able to repay the money they owe, but it could help someone who has multiple debts to multiple creditors and wants to lower their monthly expenditure and/or simplify their finances.

Debt consolidation involves taking out a new loan and using it to repay all their unsecured debts. The individual will then make regular monthly payments to their new lender until the loan - plus any interest - has been repaid.

If the individual arranges to spread their repayments over a longer period of time than their original debts, then they can reduce their monthly outgoings. It is important to note that by doing this, they may be paying more in the long run, as their debt will be accruing interest for longer.

However, if the debt consolidation loan has a lower interest rate than some or all of the debts they're consolidating, then they could still save money in the long term as well as on a monthly basis - they might be paying interest for longer, but it wouldn't be growing as quickly.