Are you struggling to manage your debts? An Individual Voluntary Arrangement (IVA) could be a great option for you. It’s a legally binding agreement between you and your creditors that enables you to pay off what you owe in manageable monthly payments over a fixed period of time.
This article will provide an overview of how IVAs work, their benefits, the eligibility criteria, and more. So if you’re considering an IVA to manage your debt, read on!
What's Included?
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between an individual debtor and his/her creditors that enables them to repay the money they owe in affordable monthly payments over a fixed period of time. If accepted, it stops any legal action taken against the debtor by the creditors and protects them from having to declare bankruptcy.
How can Credibble help me?
Dealing with debt can be overwhelming, especially when debt collectors or bailiffs are involved. Don’t panic! The Credibble Team is here to help. We can help you to stop proceedings and reduce the cost of your debt for free.
We offer a unique debt solution service that is partnered with Equifax, a world leader in providing consumer credit report data. This means we can provide instant access to all your major debt without you having to search through paperwork. Furthermore, we have gained the support of the NatWest Accelerator Programme for business and have a multiyear relationship with the organisation. We have extensive and unique knowledge of personal finances that goes far beyond debt solutions – so you can trust that you are in safe hands.
How Does It Work?
Once an IVA is set up with the help of a licensed Insolvency Practitioner, it will last for a fixed period of time (usually between five and six years). During this time, you will have to make one agreed payment every month, which is worked out by your Insolvency Practitioner based on what you can afford to pay, and the amount of debt you owe.
Once the IVA is over, any remaining debt that hasn’t been paid off will be written off. This means that if you have stuck to the terms of your agreement, you won’t have to make any further payments.
Will an IVA work for my circumstances?
An IVA is a great option for those struggling to pay off their debt but not ready to declare bankruptcy. However, it is important to note that there are certain eligibility criteria for taking out an IVA, such as:
- You must owe at least £5,000 in unsecured debt
- You must have a regular income to make payments
- You must be an individual debtor.
If you meet the criteria and think an IVA is a good option for you, Credibble can help.
What type of debts can be included in an IVA?
An IVA is a great option for dealing with unsecured debts, such as credit cards, personal loans, and overdrafts. It can also include secured debts, including HMRC debt and student loans.
What types of debts can’t be included in an IVA?
An IVA is unsuitable for all types of debt, and certain debts cannot be included in the arrangement. These include council tax arrears, child support debt, and court fines.
How do I apply for an IVA?
Applying for an Individual Voluntary Arrangement (IVA) is a relatively straightforward process, although it requires professional assistance from a qualified Insolvency Practitioner. To apply, you must submit an official application form with your income and expenditure details and a statement of your assets and liabilities. Once your application is accepted, you can start making payments to your creditors in accordance with the terms of the arrangement. Here at Credibble, we can show you your best options – click the link at the bottom of this page for further help.
What happens to my career and home with an IVA?
An IVA can majorly impact an individual’s career and home life. When taking out an IVA, it’s important to remember that your credit score will be affected, which may make it difficult for you to obtain loans or mortgages in the future. In addition, if you own your home and the amount of debt owed is more than a certain percentage of its value, it may be at risk of being sold off to repay your creditors.
Will I still be able to get a mortgage with an IVA?
Getting a mortgage while under an Individual Voluntary Arrangement (IVA) is possible. However, this depends on the lender’s criteria, and you may need to provide evidence that your IVA is being managed effectively. In addition, it’s worth noting that lenders are usually more reluctant to provide mortgages to those who have an IVA in place since it indicates that you have previously had difficulty managing your finances.
Will creditors have a right to any of my possessions?
Regarding creditors having the right to any person’s possessions, it is important to note that this depends largely on the type of debt being repaid. With an IVA, creditors cannot take any of your possessions without court approval. However, if you are paying off secured debts such as a mortgage, the lender may have certain rights to your possessions.
My bank accounts, savings, and pensions
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors that enables you to pay off what you owe in manageable monthly payments. It does not affect any of your assets by default, such as bank accounts, savings, or pensions. However, it is worth noting that you may be required to make payments from these assets depending on the terms of your IVA agreement. It is important that you seek advice from a qualified Insolvency Practitioner to ensure that you understand any potential implications.
Advantages of an IVA
An Individual Voluntary Arrangement (IVA) can be a convenient and effective way for people with unmanageable debt to gain control of their finances. There are several advantages to using this type of arrangement, including:
- The ability to repay debt in a manageable and affordable way
- An immediate halt to creditor action, such as legal proceedings or repossession of your home
- No need to sell any of your possessions
- A single, consolidated monthly payment instead of multiple payments to creditors
- No more interest or charges on your existing debts
- Creditors are legally bound by the terms of the IVA, which gives you greater protection
Disadvantages of an IVA
While an Individual Voluntary Arrangement (IVA) can be a great way for people to manage their debt and regain control of their finances, it’s important to be aware of the potential disadvantages too. These include:
- A negative impact on your credit score
- Your creditors are not obliged to accept your proposal, and the arrangement may be rejected
- Your assets, such as your home, may be at risk of being sold to repay your debts
- You will not be able to obtain credit while in the IVA
- The arrangement may last for up to 5 years, depending on the terms of the IVA agreement, but may be extended for a further 12 months to allow you to make all agreed payments.
How is an IVA managed and the Role of an Insolvency Practitioner?
An Insolvency Practitioner (IP) is an expert who can help individuals or businesses when they are facing financial difficulties. They will be responsible for managing your Individual Voluntary Arrangement (IVA). This means that they will act as a go-between for you and your creditors, ensuring that the terms of the IVA are adhered to, and payments are made on time. They will also be able to provide advice and assistance throughout the process.
How do I manage an IVA?
Managing an Individual Voluntary Arrangement (IVA) requires commitment and dedication from the debtor to ensure that the payments are made in full and on time. Keep in close contact with your Insolvency Practitioner and creditors, as this will help ensure that your IVA is successful and that all payments are made as agreed. It is also important to keep accurate records of your income and expenditure to ensure that you can make the agreed payments each month. If your circumstances change, then make sure to inform your IP and creditors as soon as possible.
How much does an IVA cost and what exactly are the fees?
An Individual Voluntary Arrangement (IVA) is an attractive option for individuals facing unmanageable debt as it allows them to pay off what they owe in manageable monthly payments. The fees associated with an IVA will depend on who you choose to act as your insolvency practitioner (IP) and the terms of your specific arrangement. Generally speaking, an IVA fee will include an up-front fee to cover the IP’s advice, the costs of setting up the arrangement, and a monthly fee for administering the arrangement. Your IP will be able to provide you with an estimate of the fees, and you should also check that they are registered with a recognised insolvency body.
What are the different types of IVA that exist?
There are two main types of Individual Voluntary Arrangements (IVAs) available. The first is a Creditor-Led IVA, which is where the creditors bring forward a proposal for an IVA. This type of arrangement is often favoured by creditors as it can enable them to get a better return on the debt than other options, such as bankruptcy. The second type is a Debtor-Led IVA, where the debtor proposes the terms of the arrangement. This type of IVA is more likely to be successful as the debtor has more control over the terms and can work with the IP to negotiate more favourable terms.
What are Joint IVAs
Joint IVAs, or Joint Individual Voluntary Arrangements, are a form of debt relief arrangement which can be set up by individuals who are jointly and severally liable for a debt. This means that both individuals are liable for the entire amount of the debt rather than just one individual. Joint IVAs allow both individuals to make a single, lower payment each month, which will be spread over the duration of the arrangement and can help to make the debt more manageable. However, it is important to note that a Joint IVA will still affect both individuals’ credit ratings and could affect the terms of any future loans or credit applications.
What are Full and Final IVAs
Full and Final IVAs, also known as ‘Debt Write Off IVAs’, are a type of Individual Voluntary Arrangement (IVA) where the debtor agrees to pay a lump sum to their creditors in full and final settlement of their debts. This type of arrangement can often be more attractive to creditors as it allows them to get a better return on the debt than other options, such as bankruptcy, and the debtor will be free from the debt as soon as the lump sum is paid. However, it is important to note that a Full and Final IVA will still affect the debtor’s credit rating and could affect their ability to access future loans or credit.
Note that a debt management plan or a Debt Relief Order may be more suitable if you cannot afford a lump sum payment. Let Credibble help you to decide the best option for your debt with our simple checker.
Is it possible to cancel an IVA and how?
Yes, it is possible to cancel an IVA, and the process of doing so depends on the stage of the agreement you’re in. If the IVA has not yet been approved by your creditors, you can request to be released from the agreement. However, if the IVA has already been approved, you can only be released from the agreement if all of your creditors agree to it or if the IVA fails. If this is the case, your IP should be able to help you with the process.
It is important to remember that cancelling an IVA will negatively affect your credit rating and could make it more difficult to access future loans or credit. If you consider cancelling your IVA, you should speak to a debt advice specialist first.
