For people having serious difficulties with their debts, one option is an IVA (Individual Voluntary Arrangement): a legally-binding debt solution that could help you to clear your debts within five years.
Before you enter into an IVA, your Insolvency Practitioner (IP) will want to look at your income and essential outgoings, to establish how much you can afford to pay each month. You`ll be expected to pay as much as you can afford once your other essential costs have been covered.
Once this has been established, your IP will work with you to draw up an IVA proposal - the document that details the proposed terms of the IVA. This will demonstrate to your lenders why an IVA is the best option for everyone involved.
The IVA proposal must be accepted by 75% of voting lenders (by debt value) for the IVA to go ahead. If this happens, all your lenders will be bound by the terms - even those who didn`t vote in favour.
Once the IVA starts, you`ll make regular monthly payments to your IP, who will pass on the agreed amounts to each of your lenders. This will usually carry on for five years, although some IVAs have a different repayment period.
On successful completion of the IVA, your remaining unsecured debts will be written off, and you`ll be legally debt-free.
IVAs are only available to people with unmanageable debts. To qualify, you`ll need to show that you can`t afford to repay your debts in full within a reasonable time, but that you can afford regular monthly payments towards your debts for around five years.
With that in mind, you`ll need to be in steady employment when you apply for your IVA, and you`ll need to have a reasonable amount of disposable income available (usually £200 a month or more, although you may still be eligible for an IVA with less than this).
Even if you do qualify for an IVA, it might not be your best option. Depending on your circumstances (or personal preference), alternative debt solutions such as a debt management plan, bankruptcy or a Debt Relief Order might be more appropriate.
Always discuss your options with a debt adviser. Click here for a free call-back from one of our experts, or call us today on 0800 195 2911.
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