An IVA is a formal and legally-binding agreement with your lenders in which you`ll repay an agreed percentage of your debts in smaller monthly payments (based on what you can afford after other essential costs have been covered). On successful completion of your IVA, your lenders will write off any remaining debt, and you`ll be legally debt-free.
An IVA usually involves making payments once a month for five years, and there are likely to be other clauses in the agreement. For example, you may be required to contribute most of any increase in income during the IVA, and if you`re a homeowner, you may have to release some of the equity in your home in the final year of your IVA.
During an IVA, the interest you pay on your debts will be frozen, meaning your debts won`t be getting any bigger. Your lenders will not be allowed to pursue you any further for the debts, so as long as you keep to the terms of your IVA, you will be safe from bankruptcy or any kind of action from your lenders.
It`s important to remember that you`ll only be eligible for an IVA if you have no realistic way of repaying your debts in full - and the impact on your credit rating means that it will only be worthwhile if it really is the right option for your circumstances. Your Insolvency Practitioner (IP), who helps to set up your IVA, will tell you if you`d be better off with another debt solution.
When you make a payment on your IVA, the money will go to a client account before the agreed amounts are distributed between your lenders. In some cases, this could earn interest - although any interest accrued will usually go towards your creditors as part of the debt repayment agreement. It will not affect your monthly payments in any way.
If you`re thinking about entering into an IVA but want more information, click here or call us today on 0800 195 2911.
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