An Individual Voluntary Arrangement (IVA) is a formal agreement that can help you in repaying your debts. It is a famous alternative for bankruptcy because it is flexible (less restrictive) solution for you debt issues but you need to get an advice before getting into an IVA agreement.
Here’s a short guideline for you to understand the benefits as well as the issues in an IVA.
What is an IVA?
Individual Voluntary Arrangements is an agreement for debt management between you and your creditors. It defines that how much money will you pay to your creditors in a fixed term and allows to avoid bankruptcy and other such penalties. IVA’s are usually arranged for a period of 5 years. The interested and charges that you owe are frozen for that period and the money that you have not paid back will be written off after 5 years.
You may pay back less with an IVA than the total amount of money that you owe. Your monthly payments will be based on considering on what you can afford specifically that you have enough money to pay for essential things like rent or food.
Who can get an IVA?
- It would be right to go for an IVA if you qualify for certain requirements which are following:
- You need to owe more than £15,000 to two or more than two creditors.
- You owe money to two or more creditors (a credit card and personal loan with one bank is counted as only one creditor).
- You are struggling for reducing your debts.
The benefits and drawbacks of an IVA
Before you deciding an IVA for yourself you need to think about its benefits as well as its drawbacks as a whole.
-The benefits of an IVA
- An IVA is less strict in nature and less prone to bankruptcy.
- It is more confidential than bankruptcy, that it is not announced publicly.
- You are usually able in keeping your assets like your house.
- Your business or trade can be continued without any issue.
- They have duration of 5 years and after that you will be debt free.
You IVA is set according to you so will decide your repayments as per your affordability.
An IVA stops any kind of legal action from your creditors.
-The drawbacks of an IVA
- Your credit score/rating can be negatively affected.
- Anyone can’t sign up for an IVA; you need to have a lump sum payment or monthly income.
- Chances of bankruptcy are there if there are issues in repayment.
- If your conditions change and your IP is unable to get your creditors to agree on new terms, your IVA may end.
How do you get IVA help?
You need to consult an IP about your debt issues and they will guide you regarding opting an IVA is suitable for you or not. If it is the right option, the IP will make you understand about the application process, proposal, requirement of relevant information etc. which needs to be approved by your creditors.
A meeting will be held with your creditors in which they will decide and vote for your IVA and if the majority of your creditors approve then you will get an IVA.
What happens after the IVA is completed?
After competition of your repayments in your IVA, your IP will issue a certificate to you of completion and will send the details to the Insolvency Service for updating your records in that. It is highly recommended that you should send the copy of your certificate to the various reference agencies so that they would know the successful completion of you IVA.
Your finances after IVA help
The records of your IVA will be there in your credit history for a period of 6 years (one year more than the IVA’s duration). It does not mean that by getting an IVA you would be on the credit blacklist, after completing you IVA you will be able to start rebuilding your credit history.With the passage of time you would know how to control your finances. Improving your credit score or rating and your ability for getting credit will also increase.