If you are in debt and having trouble making your monthly repayments, the burden can easily take its toll on you. There are various options available to those struggling to repay their debts and one of these is the Individual Voluntary Arrangement (IVA). An IVA is not as drastic a step as bankruptcy and could certainly be a better option for a lot of people who are trying to avoid bankruptcy.
What is an Individual Voluntary Arrangement?
If you decide to go through with an IVA, you will be making a legally binding agreement between you and your creditors. It sets out a mutually beneficial structured schedule of repayments for you and your unsecured creditors. If your debt exceeds 10,000 and is owed to two or more creditors, you could certainly be eligible for an IVA.
If you are unable to repay your debt within what is considered a reasonable amount of time, an IVA will let you make smaller, more affordable repayments over a fixed period, usually five years. These affordable repayments allow you to still keep enough of your income for essential living costs, like your mortgage or rent, utility bills and food.
The benefits of an Individual Involuntary Arrangement
Taking out an IVA prevents legal action from your creditors, including bankruptcy and all the consequences that brings. You will be able to keep your home and if your creditors agree you could potentially have up to 70% of the debt written off. Writing off debt like this will usually be subject to your completing the IVA. Your creditors could also agree to freeze any further interest and charges and they will be forbidden from contacting you for additional payments, which can go a long way to easing the debt burden you are under.
Who can apply?
You must have two or more different lines of credit and a minimum debt of 10,000. You must be able to make a minimum monthly repayment of 200, dependent on the total amount of debt and you must also be in full-time employment.
How does it work?
Your monthly repayments will be based on what is affordable for you and your circumstances. A calculator for an IVA can help you work out what your repayments and fees are likely to be over a five-year period, based on your individual circumstances. The amount may vary over the five-year term of the agreement, in line with changes in your income and expenditure. When you have made your final repayment, the rest of your debt is written off; in some cases this can be up to 70%.
Your credit rating will be affected for six years and if you own your own home you are unlikely to lose it, although in the final year of the agreement you may be required to release equity at the end of five years. When setting up and IVA you should always use a reputable Insolvency Practitioner; check their fees and keep in mind that you are entering into a legally binding agreement.
The Insolvency Practitioner will collect your monthly repayment and distribute the agreed amount amongst your creditors. Your personal circumstances will be subject to an annual review, but at the end of the period of the agreement you will be free of your debts as long as you have kept up the repayments.
This guest submission was contributed by Lloyd on behalf of IVA Expert.
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