If you`re looking for a solution to unmanageable debt, then an IVA (Individual Voluntary Arrangement) could be what you`re looking for.
An IVA is a legally-binding agreement with your lenders in which you`ll repay as much of your debts as you can afford over an agreed period of time, after which the rest of your debt will be written off.
In this time, interest will be frozen, which will prevent your debt from getting any bigger.
On successful completion of the IVA, you`ll be legally debt-free, although a record of the IVA will stay on your credit history until 6 years after the IVA started.
IVAs were brought in as an alternative to bankruptcy. As part of the Insolvency Act (1986), IVAs are a legally-binding contract, meaning that once the terms have been agreed, you and your lenders will be bound by them. This means your lenders can`t pursue you any further for the debts unless you break the terms of your IVA.
Likewise, you will be expected to stick to the agreed terms of your IVA. Before you can enter into an IVA, your Insolvency Practitioner (IP) and lenders will have to be satisfied that you are capable of keeping up with regular monthly payments, so you won`t usually be able to enter into an IVA unless you can demonstrate that your income is stable.
Of course, things can change. If your finances take a turn for the worse and your ability to keep up with your IVA payments is affected, you will usually be protected in the short term by some kind of grace period in your contract. Most IVAs allow for a relatively short payment break (usually up to six months) to give you a chance to get your finances back in order.
However, if your problem is likely to be more long-term, your IP may have to propose a variation (a change to the terms of your agreement) on your behalf. If this can`t be done, your IVA may fail - in which case you`ll need to find an alternative debt solution, such as a debt management plan or possibly even bankruptcy. Your IP can talk you through all your options if you find yourself in this situation.
For more information on the protection an IVA can offer, click here or speak to one of our expert debt advisers by calling 0800 195 2911.
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