Managing debt can be stressful & complicated. Arranging an Individual Voluntary Arrangement (IVA) with your creditors could make a real difference to you by writing off any debt you can’t afford.
In recent years the number of people entering into an Individual Voluntary Arrangement (IVA) with their creditors has increased significantly. It is seen as a good alternative to bankruptcy and can, in most cases, protect the family home from re-possession. In an IVA you repay only what you can afford for a fixed period, after which any remaining debts are written off (see example below).
The above example is very simple but it does illustrate what happens in an IVA.
So, what is an IVA?
An individual voluntary arrangement (IVA) enables you to avoid bankruptcy by making a formal agreement with your creditors to pay off a percentage of your debts over a fixed period. It is a legal process that protects against further interest and charges being added.
Who should consider an IVA?
An IVA may be appropriate for anyone with a regular household income who has perhaps over borrowed or over committed and is struggling to keep up repayments. As a rule the minimum unsecured debts of someone entering an IVA is £15,000 but is often much higher. There is no maximum amount.
(Unsecured debt is any debt not secured on an asset such as a house. Typically it is credit card debt, loans, HP agreements etc)
How does an IVA work?
Typically, an IVA agreement will see your creditors (the people to whom you owe money) agree to write off a proportion of the debt owed to them. In return you would agree to pay a proportion of your monthly income towards the debt of a fixed period, usually five years.
How do i apply for an IVA?
If you are contemplating an IVA, here’s how the process works…
Step 1
We will assess your financial situation to see whether you are eligible to enter this type of agreement. If you do one of our insolvency practitioners will need to “nominate” you for the IVA. This is simply part of the process and means they feel an IVA is right for you.
Step 2
We will then draw up your proposal based on the information you provide and allow you to put forward the best offer of repayment you can afford. The offer could be a one-off lump sum payment (full and final settlement), or regular monthly payments over a fixed period. You won’t have to deal with this yourself, we will assist you every step of the way.
Step 3
A copy of your proposal is sent to each creditor and asked to vote to accept or reject the proposal. If a majority (more than 75%) accept then the IVA is approved and will be legally binding for all creditors (even those who may have rejected the proposal).
Step 4
One approved you simply start to make the agreed payments or lump sum and all phone calls and letters from creditors must cease.
Step 5
Once the agreed payments have been completed the remainder of the debt will be cleared.
If you are thinking of entering an IVA its important to weigh up the advantages and disadvantages in equal measure…
Advantages
- Interest on your debts will be frozen
- Legally protected against legal action from by your creditors
- Once the IVA is completed any remaining unsecured debt is written off
- All your unsecured creditors will be bound by the IVA
- Unlike bankruptcy IVA’s are not published in local papers
- Entering an IVA should not effect professional careers or prevent you from acting as a director.
Disadvantages
- You will need to stick to a budget for the term of the IVA
- You will need to provide full disclosure of all assets and liabilities
- You may be asked to release some equity from your property toward the last six months of your IVA.
- Any windfall, inheritance or bonus must be declared during the IVA.
- IVA’s are recorded on a register and are likely to appear on your credit file.
Seeking an IVA is just one way of dealing with financial issues and may represent a viable solution to your debt problems. There’s no doubt that going through money troubles can be stressful and talking it through with friends or family is not easy. We’re impartial and non-judgemental: most of all, we are committed to finding a realistic solution that is right for you.
If you think an IVA would benefit your situation and you would like to discuss it, please call us now on 0800 046 8297 and speak to a qualified professional.
And remember, you won’t need any money for us to act on your behalf.
