Individual Voluntary Arrangements or IVA is a legal agreement between you and your creditors, sometimes mediated by Insolvency Practitioners (IP). This is a proposal for your creditors where it contains your plan to pay off your debts within a given time frame. Most of the time is within 3 – 5 years. IVA is applied to by those that see no other way to pay off their debts; it is usually one step away from bankruptcy.
Although, not all can be approved for IVA there are certain requirements before one will be permitted to apply.
If you have an unmanageable level of unsecured debt you can’t afford to repay within a reasonable amount of time, but you can commit to making regular reduced monthly payments, then an IVA (Individual Voluntary Arrangement) could be right for you. You can choose IVA online too.
What is an IVA, and how does it work?
An IVA is a legally binding agreement between you and your unsecured creditors in which you will be expected to make regular reduced monthly payments to your IP (Insolvency Practitioner) for, in most cases, 5 years.
Before you enter into an IVA, you will have to speak to a debt adviser to discuss your situation. If they are sure that an IVA is the most suitable way for you to repay your debts, you’ll talk to an IP, who will work along side you to draw up an IVA Proposal – which will be sent to your creditors. This will include details such as, how you aim to repay your debts and how much money each creditor will receive if the agreement goes ahead.
So how is an IVA approved?
In order for an IVA to begin, voting creditors who collectively ‘own’ 75% or more of your overall debt have to agree to the terms laid down in your IVA Proposal.
What happens when it is approved?
If your unsecured creditors approve of the IVA, then you will start making regular reduced monthly payments to your Insolvency Practitioner – who will subsequently share money among your creditors according to how much you owe each of them.
How long will my payments last for?
In most cases, you will make payments to your IP for 5 years. However, this may vary depending on the terms of the agreement and whether you miss any payments during it.
Assuming your IVA comes to successful conclusion, any remaining unsecured debt will be written off.
Are there any drawbacks?
If you are a homeowner, you may be required to release some of the equity in your property during the final year of the IVA – this will be used to pay off more of your debt. Also, entering an IVA will show up on your credit report – which will affect the availability and/or cost of credit for 6 years from the time it starts.
IVA needs certain net income, and a sound plan before creditors agree on your proposal. In UK, your disposable salary should be at least 200 ?. The amount will be agreed upon by all parties concerned, you, your creditors and your IPs. Then, all your creditors would need to be present at the time your proposal will be presented, if at least 75 per cent of them agree, then you are on your way to being debt- free. The remaining 25 per cent will adhere to the IVA.
IVA is a lifeline extended to you by your creditors, they are willing to enter into a legal contract that will provide you with all the benefits. Once your creditors agree on your IVA, collection agents from creditors and the IPs will work side by side so as to stop getting in touch with you regarding your payments, be it on the phone or by demand letters.
You would also be protected against legal action from your creditors as long as you are paying the amount agreed upon on your IVA. Throughout the course of your agreement, the interest rates and charges will be fixed.
However, IVA will also have some effects in your life. For one, throughout the course of your IVA, you will not be allowed to obtain unsecured debts. You will be prevented from getting credit cards, or even store cards. Such measures are taken to assure that you will not get into other debts. After your IVA rest assure that your credit rating will be returned favorably. All your remaining debts will be written off by the end of a successful IVA.
Entering an IVA is a dignified way of paying off your debt. Do not be concerned as to it being publicized; your case will be confidential to protect you and your profession.
It is important to note that before entering into any debt solution, you should discuss your options with a professional debt adviser. They will be able to discuss your situation with you and help you decide on the best course of action. You may find that an alternative debt solution, such as a debt management plan, is more appropriate for someone in your situation.