What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a legal instrument that an insolvent individual can use to work their way out of debt without suffering the difficulties connected with creditors harassing them, bailiffs & debt collectors visits & calls, CCJs and mounting interest and ultimately potential bankruptcy.
Although more and more people are getting to know about IVAs, they are still somewhat unknown and misunderstood by many people.
So, here’s the lowdown on what an IVA is:
An IVA is a legally binding agreement between a debtor and their creditors in which it is agreed that in return for a regular affordable payment over a fixed term (usually 5 years), the creditors will freeze interest during the term and write-off any unpaid amounts owed at the end.
Sounds great doesn’t it?
What are the downsides?
Well, your regular payments will be calculated to be as much as you can afford after essentials and a small contingency amount have been accounted for out of your regular income – this means that you’ll be keeping your head down and working your way out of debt with very little spare income for any extras or luxuries until you have completed your IVA. Also, if you are a homeowner then any increase in your home equity can be demanded (usually in year 4 of your IVA) by your creditors to help pay your debts in addition to your regular payments, the same applies to any inheritance or other ‘windfall’ monies or assets you acquire during your IVA.
What are the upsides?
The upsides are many, some of which are listed here:
- Interest & charges on your debts are frozen
- Telephone calls, letters and visits from creditors or their agents will cease
- In some cases you will repay less than half the amount you owe with the balance written off
- Your debts will be completely gone when you complete your IVA
- You will avoid bankruptcy and the problems & stigma attached to being bankrupt
Is an IVA right for you?
Everyone’s circumstances are different, and an IVA is only one solution, other solutions such as Debt Management, Debt Consolidation or even Bankruptcy can be more suitable solutions in certain circumstances.
What should you do then?
Your next step should be to spend 5 minutes filling in the online Debt Analyser to see what options are available and recommended for your personal circumstances.
