An IVA (Individual Voluntary Arrangement) could be a big help if you’re struggling with unmanageable unsecured debts. It works by enabling you to repay only what you can afford, and writing off what’s left.

To set up an IVA, you’ll need the help of an Insolvency Practitioner (IP). It’s a legal process, so your IP will need to take care of all the formalities for you.

How an IVA is arranged

To begin with, you’ll need to speak with a debt adviser (or your IP) about whether an IVA is the best solution for your circumstances. If it is, you can move onto the next stage with your IP.

You’ll work with your IP to draw up an IVA proposal – a formal document setting out your case for an IVA. This will provide your unsecured lenders with details of your financial situation and the proposed terms of your IVA.

For your IVA to go ahead, this proposal must be agreed by 75% of your lenders (by debt value).

What happens if it’s agreed?

A typical IVA involves making monthly payments for five years (although the timescale can sometimes vary). You’ll make payments through your IP, who will distribute the agreed amounts between each of your lenders.

You will be expected to pay as much as you can afford each month, once other essential costs (such as groceries and bills) have been paid for.

On successful completion of the IVA, any remaining debt will be written off, and you’ll be legally debt-free – as far as your unsecured debts are concerned (it won’t write off mortgage debt, for example).

Is it right for me?

An IVA is an insolvency procedure and will have a serious effect on your credit rating. It’ll affect your ability to borrow more money in the next six years, starting from when it begins. And if you’re a homeowner, you may have to free up some equity from your home so you can pay more into the IVA.

If you’re going to apply for an IVA, it’s important that you’re sure it’s the right solution for you. IVAs are only appropriate for people who can’t afford to repay their debts in full, but can still (in most cases) commit to smaller monthly payments.

If that doesn’t apply to you, you’ll need to consider the other options available. An expert debt adviser may be able to help you find a different debt solution that meets your needs.

Similar Posts:

  • Share/Bookmark