When your debts have become so unmanageable that you can`t see yourself ever repaying them within a reasonable period of time, one option for clearing your debts is an IVA (Individual Voluntary Arrangement). This formal arrangement can allow you to pay off as much of your debts as you can afford, after which the rest will be written off - although there are downsides you`ll need to consider.
There are also a few criteria you`ll need to meet before you can enter into an IVA. And remember: even if you are eligible, there may be other debt solutions that are more suitable for your personal circumstances.
An IVA is an arrangement with your lenders in which you`ll repay an agreed percentage of your debts (as much as you can afford once your other essential expenses have been covered). You`ll be expected to pay as much as you can for an agreed period - usually around five years, but this can vary.
In return, providing you stick to the agreement, what`s left of your debts will be written off and you`ll be legally debt-free. And because it`s a legally binding agreement, your lenders won`t be able to pursue the debts any further once the IVA is in place.
However, keep in mind that an IVA will significantly affect your credit rating, and this will make borrowing money more difficult in the future. For this reason, it`s only worthwhile if you are certain it`s the best option for clearing your debts. If you`re unsure, a debt adviser can help you decide.
There are a few things that you`ll usually need to prove before you can enter into an IVA:
There are some other rough guidelines - such as an IVA being eligible for people with larger debts, typically over £15,000, and an ability to meet monthly payments of more than £200 - but these aren`t always essential. It may be possible to enter into an IVA with lower debts, and in some cases a lower monthly payment. What`s more significant is whether an IVA is realistically your best option.
For more information on IVAs, click here or call one of our expert debt advisers on 0800 195 2911.
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