An individual Voluntary Agreement (IVA) is a legally binding arrangement between you and your unsecured creditors, where you agree to pay a single consolidated, and crucially, affordable monthly payment over a period of time.
The amount is usually at least £90 per month and the length is usually over five years.
When the IVA expires, assuming you have stuck to the terms, any unsecured debts that are left unpaid are written off.
But, is an IVA the right choice for you?
First of all, you’ll need to know whether you qualify or not…
To qualify for an IVA, you need to live in England or Wales, Scotland has it’s own debt solution called a Protected Trust Deed. You usually need a minimum debt level of £6,000 of unsecured debt, with at least two lenders. The type of debt that you have may vary across things such as credit cards, loans, catalogues, store cards, etc.
In addition to this, you must be able to prove that you’re struggling with your current repayments if you’re to be considered for an IVA.
Just because you qualify for an IVA however, doesn’t necessarily mean that it’s the right choice for you.
You can find out about the types of debt that an IVA can be used for here, but some things worth considering are that:
- You need approval from unsecured creditors who you owe at least 75% of your debt to.
- An IVA stays on your credit report for 6 years which affects your credit rating.
- An IVA is a legally binding contract with limited flexibility.
- Should your financial situation improve, you might be required to increase your payments to align with your income levels. This includes substantial earnings in overtime or bonuses.
- If you are a homeowner, you may be required to release equity by re-mortgaging your property.
Whilst the above points must be considered, there are certain benefits to getting an IVA which are just as important to bear in mind:
- An IVA consolidates all your debts into one affordable monthly payment.
- All interest and charges are frozen upon the creation of an IVA.
- All contact between you and your creditors will cease and be handled by your Insolvency Practitioner. You’ll also receive full legal protection from further creditor action.
- Should your financial situation worsen, your IVA may be altered to reflect this change of circumstance.
- Upon the completion of the IVA’s fixed term, any remaining debt will be written off.
After weighing up the benefits and considerations, and checking whether or not you qualify, you may decide that an IVA is the best solution for your needs. What is right for one person though, may not be right for the next person, and each case needs to be looked at on it detail and in isolation.
To find out more about an IVA contact one of our debt specialists today on 0800 254 5112
