If you’ve taken the first steps to finally tackle your debts head on, it probably didn’t take all that long to come across a debt solution that seemed to be mentioned time and time again. We talk of course of an Individual Voluntary Arrangement (or IVA for short).
Record numbers of individuals are turning to IVAs to help them deal with their debt (it’s estimated that around 60,000 people used IVA Arrangements in 2018 alone). But if you’re considering the route of an IVA Arrangement, there are 6 things you should know before contacting an IVA provider.
1. IVAs aren’t designed for every debtor and all debts
As a responsible business, we want to be clear – IVAs aren’t suitable for everyone.
Individual Voluntary Arrangements are designed for those who fit the following criteria:
- You have a minimum of two separate debts
- You have a minimum of two creditors (a creditor is a business to whom you owe money)
- Your debts total to in excess of £10,000
- You have sufficient spare income to be able to make monthly repayments on your debts (typically around £100)
If you don’t fit the criteria for an IVA Arrangement, there’s no need to panic – today there are more debt solutions than ever before. Head to our debt solutions page to explore IVA alternatives.
2. Like many other debt solutions, an IVA Arrangement will affect your credit record
IVA Arrangements are recorded on your credit report for six years after the date the IVA began. However, if you’re considering an Individual Voluntary Arrangement, your credit is most likely already impaired by your debts (something that will only worsen if you don’t take action to tackle them now).
3. There are many compelling advantages that an IVA Arrangement could provide
If you’re eligible for an IVA, an Individual Voluntary Arrangement would:
- Stop your creditors from chasing you
- Provide you with a reasonable repayment amount each month
- Save you paying interest and fees (with an IVA, both are frozen)
- Offer a little flexibility should your circumstances change (but you would need to speak with your Insolvency Practitioner, who would review your case and either provide a payment break or renegotiate reduced repayments)
An IVA Arrangement could also save you money on your total debts, as your creditors may agree to letting you repay less than what you owe.
4. If you have no spare income, an IVA Arrangement probably isn’t the best debt solution for you.
An Individual Voluntary Arrangement requires that you come to an agreement with your creditors (via an intermediary) that involves a monthly repayment. If you have no spare income left after paying household bills and other essentials, then an Individual Voluntary Arrangement won’t be the right route to take. You may want to consider bankruptcy if options such as selling assets or equity release aren’t suitable.
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5. You may need to include your assets as a part of the IVA Arrangement
If you have sizeable assets – such as a vehicle or high-value jewelry – you may be required to sell them to help repay your debts as part of the IVA Arrangement. You are required by law to inform your Insolvency Practitioner about all of your assets when applying for an IVA.
In the case of property, you wouldn’t be required to sell your home if it’s your primary residence, but you may need to apply for an equity release loan if you have reasonable equity within the property.
6. An IVA Arrangement could worsen your financial circumstances if not used responsibly
If you fall behind with your IVA repayments and don’t communicate with your Insolvency Practitioner, your IVA Arrangement will be terminated. Should this happen, you’ll not only be in the same situation as prior to the Individual Voluntary Arrangement, but you may also be worse off as your creditors may lose faith in you and your willingness to work with them. This could lead to them partitioning for bankruptcy against you.
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