For people with unmanageable debts that they cannot see themselves being able to repay, an IVA (Individual Voluntary Arrangement) can offer a way out of debt. It`s a legally-binding arrangement in which you, the borrower, will arrange to repay as much of your debt as you can afford, after which your lenders will write off the rest.
However, not all debts are covered by an IVA - and you should make sure you understand the personal consequences of an IVA before you go ahead. You should also consider that an IVA is a longer-term commitment that will have a significant impact on your credit rating, and as such you should only go ahead if you`re sure it`s the right option.
Setting up an IVA involves working with an Insolvency Practitioner (IP) - the professional who will be responsible for the month-to-month supervision of your IVA if it goes ahead.
Before your IVA can start, your IP will help you put together your IVA proposal and will carry out any negotiations with your lenders to try to get a mutually agreeable arrangement accepted. Your IVA proposal will detail the terms of the IVA (such as how much you can afford to pay to each of your lenders, and over what period of time).
This proposal will then be sent to each of your lenders, who will be given a minimum of 14 days to `vote`. Of voting lenders, those accounting for at least 75% of the total debt must approve the terms of your IVA for it to go ahead.
If the IVA is approved, you`ll start making regular payments - usually once a month for five years, although this can vary.
On successful completion of your IVA, your remaining debt will be written off and you`ll be legally debt-free.
If your lenders have placed charging orders on one or more of your debts, those debts will effectively be secured, and therefore will count as priority debts.
An IVA will not usually include priority debts. However, an IVA can still help indirectly, as your IVA payments will be calculated to fit around your priority debts and other essential commitments. This ensures that all your priority bill payments can continue to be met, whilst allowing for your remaining money to be paid into your IVA.
For more information on what IVAs can and can`t cover - or for advice on IVAs in general - click here or call us today on 0800 195 2911.
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