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IVA is short for Individual Voluntary Arrangement and is one way that you can manage a debt that you’re struggling to repay and avoid falling further behind with payments.
Available in England, Wales, and Northern Ireland, individual voluntary arrangements allow you to make regular payments to cover all or part of your debts. Typically, these are made monthly for between five and six years and are based on the amount you can reasonably afford to pay without wiping out all your disposable income.
Not only can an IVA help you manage your debt, but they can also offer more control than bankruptcy and allow you to continue running a business if you own one. And, once you’ve entered one, an IVA will legally protect you from being pursued by your creditors.
To be eligible for an IVA, you must have a regular income, unsecured debts typically over £5,000, and be unable to repay your debts in full. You must also be able to afford regular payments to your creditors.
An IVA involves making regular payments to an insolvency practitioner, who distributes the funds to your creditors. Creditors must agree to the IVA proposal, and if accepted, it becomes legally binding. During the IVA, creditors cannot take legal action against you.
IVAs generally cover unsecured debts such as credit cards, personal loans, overdrafts, and store cards. Secured debts like mortgages and car loans are not included. Some debts, like student loans and court fines, are also excluded.
Advantages of an IVA include a single, affordable monthly payment, protection from legal action by creditors, and the potential to write off a significant portion of your debts. It also provides a structured path to becoming debt-free.
Disadvantages include a potential negative impact on your credit rating, restrictions on your financial affairs, and the possibility of losing certain assets. An IVA may also affect your ability to obtain credit in the future.
An IVA typically lasts for five years, though it can sometimes be extended if the debtor’s financial situation requires it. After the agreed period and completion of payments, any remaining debts are usually written off.
Some professions, particularly those in finance or positions of trust, may have restrictions regarding IVAs. It’s essential to check with your employer or professional body to understand any potential impacts on your employment.
Missing a payment can jeopardize your IVA. If you’re unable to make a payment, contact your insolvency practitioner immediately to discuss your situation. They may be able to negotiate a temporary adjustment with your creditors.
Upon successfully completing an IVA, you’ll receive a certificate of completion. This signifies that you have met your obligations under the IVA, and any remaining eligible debts will be written off. Your credit file will reflect the completion of the IVA, which can aid in rebuilding your credit score over time.
Credit Score Pop Up Wording : An Individual Voluntary Arrangement (IVA) is a formal agreement with creditors to repay a portion of your debts over time, but it does have an impact on your credit score and it will be difficult to obtain further credit whilst on an IVA. Once an IVA is approved, it is recorded on your credit report and will typically remain there for six years from the date it starts.
However, it’s important to note this is the case for most debt solutions and your credit score will likely already have been affected by being in debt in the first place.
Once your IVA is complete you will get a fresh start to begin rebuilding your credit rating.
IVA costs are charged for the preparation of your proposal and the administration of the arrangement for the full term (usually 5 years) these costs are charged from the monthly contributions you make into the IVA and are not in addition. Costs will only be recovered on approval of your arrangement and once you commence making payments to it. The fees for preparation of the proposal to creditors and calling the meeting for creditors to vote on its approval are called nominees fees, the fees for running the arrangement once approved are called supervisors fees. There are also some expenses incurred in the running of the arrangement such as the registration fee and the statutory insurance that needs to be taken by law, these are called disbursements. For our arrangements, the total of all of these is £3,650 although this may be adjusted by creditors when they vote on whether to accept. No matter what the end total of costs come to, you can be rest assured that these will be taken from the monthly payment we agree with you.
