An IVA (Individual Voluntary Arrangement) is designed to help people with unmanageable debt problems. It can help to make both your unsecured and your secured debts (such as your mortgage) manageable - but in different ways.
An IVA involves repaying as much of your unsecured debt as you can afford over an agreed period of time. This includes things like credit card debts, personal loans and overdrafts - any debt which doesn`t have your home placed as security against the borrowed amount (like a secured loan or mortgage do).
During your IVA, you`ll be expected to pay as much as you can afford after your essential costs have been covered. Your `essential costs` include anything necessary for your basic standard of living (bills, food, etc.) and your secured debts - after all, if you weren`t able to keep on top of your secured debts, your home would be at risk of repossession.
So although an IVA doesn`t help directly with your mortgage or any other secured debt, it will (if enough of your lenders accept it) rearrange your unsecured debt repayments to fit around your secured debts and other essential costs.
A typical IVA will last for five years. On successful completion, any unsecured debt you haven`t paid back will be written off, and you will be legally debt-free as far as your unsecured debts are concerned.
Like any debt solution, IVAs have a few downsides that you`ll need to think about before you can decide whether it`s right for you.
An IVA is a form of insolvency and will have an impact on your credit rating for six years. It will also leave you with little money to spend on anything other than your essential costs.
Also remember that even though an IVA is very unlikely to force the sale of your home (like bankruptcy can), you could be expected to release some of the equity in your home to put towards your debts.
If you want to know whether an IVA is right for you, fill in our free debt test below and we`ll help you find the right solution for your debt problems.
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