If you have unmanageable debts that you need to regain control of, sometimes insolvency can be the most suitable solution. If you live in England, Wales or Northern Ireland, there are various insolvency solutions available, one of which is an Individual Voluntary Arrangement – more commonly known as an IVA.
This article will take a quick look at IVAs and how they could help people tackle their unaffordable debts.
What exactly is an IVA?
An Individual Voluntary Arrangement – IVA – is a legally binding insolvency agreement. It’s designed to help people who have a significant amount of unsecured debt that they can’t afford to repay.
Basically, once agreed, an IVA could allow you to make reduced monthly payments towards your unsecured debts. You would make these payments into the IVA for an agreed period – in most cases, over five years.
As long as you maintain your monthly payments, the remainder of your debt included in the agreement will be written off on successful completion of your IVA.
Entering an IVA makes it likely that you’ll have to release some of the equity in your home (usually in the 54th month), and it will show up on your credit history for six years – which may affect your ability to get further credit during this time.
If you think an IVA might be the best option for you, you can apply at debtadvicenow.co.uk/iva/. You might find that a debt adviser recommends a different way to tackle your debts.
How can an IVA be set up?
As a form of insolvency, an IVA can only be set up by a qualified Insolvency Practitioner (IP). They’ll talk you through your finances, discuss your financial commitments with you and calculate how much you can afford to repay towards your unsecured debts every month.
The IP will help you to create an IVA proposal, outlining the details of your financial situation to show why they think an IVA is the most suitable approach. This proposal will then be sent to your unsecured lenders, who will ‘vote’ on whether to accept your IVA or not in what’s known as a creditors meeting.
Providing enough of your lenders – that is, those who represent at least 75% or more of the total debt value – agree, the IVA will go ahead. Both you and your lenders will then be bound by the terms of the agreement, and as long as you maintain your monthly repayments, your IVA cannot fail.
Then, after five years (in most cases), you’ll be declared debt-free. Note that this only applies to your unsecured debts – secured debts like your mortgage can’t be written off by an IVA.