Having an Individual Voluntary Arrangement (IVA) doesn’t mean you’ll be in debt forever. It can help you to get back on track and, with some careful planning and management, you could emerge from the arrangement with a smaller debt burden. An IVA should be the last resort, not the first step, towards getting out of debt. It’s something you need to do if your debts are making it difficult for you to maintain a normal life. If you’re reading this, there’s a high chance you have an account with a high-interest lender, such as a credit card or personal loan. You might also have other unsecured debts, such as a mortgage, car loan or a consumer credit card. There are a number of ways you can tackle your debt and get back on track, from switching to a lower costing credit card to going out of business. An IVA is one of the most effective ways to tackle your debt.
What is an Individual Voluntary Arrangement?
An Individual Voluntary Arrangement (IVA) is a debt management plan that you enter voluntarily with your creditors. It’s important to note that an IVA doesn’t involve bankruptcy and gives you the chance to pay off your debts. It allows you to keep your assets and protects you from incurring more interest by consolidating your debts into one monthly payment.
There are two stages:
1) Set up an IVA
2) After the set period, enter affordable repayment terms with your creditors. A typical IVA lasts 5 years. During this time, you will make one single monthly payment to the trustee instead of paying each creditor individually. Your trustee then distributes payments out to each creditor in turn on a pro-rata basis according to the size of their own debt in relation to the total debt owed by the debtor.
Your creditors can’t take any legal action against you during this time without first going through the court process which is costly for them. Additionally, if they do decide to seek legal action against you outside of court, they will need a judge’s permission beforehand and will be charged substantial court fees as well as other costs relating to their application for permission.
Why Have an IVA?
An IVA is one of the most effective ways to tackle your debt. It’s a legally binding agreement that you have with your creditors and it can be used to consolidate all of your debts into one payment per month. As long as you fulfill the terms, it will mean that you won’t need to worry about being chased by debt collectors or worry about getting sued for not paying back your debts.
An IVA is an agreement with your creditors that lets you pay off all of your debts at once, usually over 5 years. You might find there are other benefits too, such as credit rating protection and the ability to get cheaper insurance rates. This can help reduce the stress on the rest of your life and allow you to start living again without feeling like you owe someone something every day.
How to Apply for an IVA
In order to apply for an IVA, you’ll need to find a licensed insolvency practitioner and agree to their terms. The main difference between an IVA and bankruptcy is that you’ll only need to pay back the amount you can afford, rather than a percentage of your total debt. This means it will take longer for you to repay your debts, but it also means less interest charges and reduced debt levels over time. There are two stages to the process: pre-arranged payments and post-arranged payments.
In this stage, your insolvency practitioner will assess how much you earn each month, as well as your outgoings. They’ll then calculate what your monthly income surplus is – the amount of money left over after paying for essentials like food, shelter and clothing – and come up with a monthly payment figure which will be used in the post-arranged payment stage.
This stage starts when all the necessary paperwork has been completed on both sides. You’ll have a set monthly sum deducted from your wages or bank account each month which will go towards repaying your debts (minus any costs incurred by the insolvency practitioner). This continued until your debts are repaid in full or until the arrangement comes to an end – whichever comes first.
How Long Does an IVA Last For?
The length of an IVA varies, depending on the amount of money you owe and your income. The most common arrangement is a period of three years, but it can be up to six years if you’re struggling financially. When you have completed the set period, the remaining debt will be written off and cleared.
Is an IVA Right for You?
An IVA is not for everyone. If you’ve been put in an IVA before, it is unlikely you will be able to enter into another one. You also need to have an income of at least £10,000 a year and your total monthly expenditure must be less than £1,350.
If you fulfill these conditions and want to get out of debt with the help of an IVA, the following advice may be helpful.
First, you’ll need to find a suitable financial advisor or debt charity who can work with you on your plan and provide information about how much money you owe. They will then assess your needs and create a repayment plan for you. When choosing which debts are repaid first, priority should go to secured debts such as mortgages or car loans which could be repossessed if they remain unpaid. Unsecured debts like credit cards or personal unsecured loans should be paid off later on in the process as they are more flexible while secured debts must often be repaid immediately. However, if there are any unsecured debts that have very significant interest rates, they should be paid off early in the process so that the repayments stretch further over time.
People often worry about whether they will ever get back out of debt with an IVA – don’t worry! With careful planning and management, it is possible to emerge from an IVA with a smaller debt burden than before entering it.
With the help of an IVA, you can get back your self-esteem and feel good about your financial situation. This is a flexible and affordable debt solution, which is designed to help you pay off your debts in a way that suits you.
The main benefit of an IVA is that it helps you to pay back your debts over a period of time that is agreed with your creditors. And if you have a family and dependents, then this solution is even more suitable for you, because it helps to protect them from the negative impacts of debt.
For more information on Individual Voluntary Arrangements, we recommend you contact the IVA Helpline.