If you’re looking for help managing your debt through an IVA, here’s why you might want to consider starting your agreement at the beginning of the year
What is an IVA?
An Individual Voluntary Arrangement – or IVA for short – is a formal debt management solution. With the help of an Insolvency Practitioner, you and your creditors will enter into an agreement that will usually last for five or six years.
During your IVA, you’ll need to pay a fixed amount towards your debt each month. The exact amount will be based on how much you can comfortably afford and any interest or charges due will be frozen. Any debt that remains unpaid when your IVA comes to an end will be written off.
If you’re struggling to keep up with your debt payments but have some disposable income to put towards them, an IVA could be a good way for you to get your finances back under control.
You can enter an IVA at any time, but the start of the year can be an especially beneficial time to get started:
New year, new finances
The start of the new year often feels like a clean slate. It offers the opportunity to take stock of your current circumstances and set goals for the future. If you’ve found it difficult to keep up with your repayments in recent months and your interest and penalty charges are adding up, you might feel inspired to start tackling your debt. It might even be your new year’s resolution.
That’s why the first quarter can be the ideal time to start an IVA; you might feel more fired up and ready to take control of your debt at this time of year. Seize that momentum to contact a debt professional and start taking steps to get your financial situation back on track.
Avoid extra interest or charges
December can be an expensive month. The onset of winter can increase your household bills while Christmas spending can easily spiral out of control. Once all the decorations are packed away and you’re back into your normal routine, you might find yourself facing up to new debt payments that run the risk of putting you in financial hardship. The prospect of paying penalty charges and mounting interest on top could make your situation even harder to navigate.
If you choose to enter an IVA, your current debts will be frozen. That means you can concentrate on paying down the balances you already have rather than worrying about paying more in interest or charges. Your creditors also won’t be allowed to take any legal action against you while your IVA is in effect.
Use your updated expenses
While the start of a new year can provide a much-needed reset, for many companies, it also signals that it’s time to raise prices. Most of your household bills and other expenses will go up in line with inflation each year – and unfortunately, your income doesn’t always increase at the same rate.
As your IVA payments are based on how much you can comfortably afford to pay, entering an agreement at the start of the year could make it easier to calculate your actual incomings or outgoings. Start in November or December instead, for example, and you might find that the amount of disposable income you have listed in your IVA might be higher than the actual amount you find yourself with in the new year.
A timely annual review
The details of your IVA will be reviewed each year. This is an opportunity for your Insolvency Practitioner to assess your circumstances and decide whether your set payment amount is still fair and appropriate. They will look at whether your expenses have increased – or if you’ve been lucky enough to receive a promotion and a pay raise for the new year.
Entering an IVA in start of the year means your annual review will take place in start of the following year. It also gives you the chance to review your current budget, assess your spending from the previous year, and look for costs you could cut in the year ahead.
Track your time
Entering an IVA is a big commitment. No matter whether it lasts five or six years, your IVA will impact how much you can borrow, your credit score, and how much you can spend on non-essentials for the entire agreement period.
Starting your agreement in early in the year could make it easier for you to keep track of where you are in the lifetime of your IVA, making it a memorable milestone and helping you have a clear timeline so you can start planning for the future.
Keen to find out more about IVAs? Our team of experts is here to help. Call us on 0161 8260 585 or send a message here