What is IVA and How Can It Help When You’re in Debt?

There are many ways that you can pay your debts, one of them being through the individual voluntary arrangement, IVA.

The individual voluntary arrangement, IVA is a legal agreement between you and your creditors. It usually lasts for a fixed period of 5-6 years. After which, the remaining balance is written off.

It is only available to people who reside in Wales, England, and Northern Ireland. If you live in Scotland, a Protected Trust Deed is the best equivalent of an IVA.

Consequently, a licensed insolvency practitioner is always assigned to you to help you reach an understanding with your creditors as well as draw a viable proposal.

The licensed insolvency practitioner will also oversee the management of your creditors for the given period until you make your payments. This is bound to reduce the stress and hassle for you, especially with creditors.

You will have to sign the proposal before presenting it to the creditors for a voting, but they can also ask for modifications or reject it. Nonetheless, as long as you have 75% of creditor votes, your IVA can go through.

After your IVA goes through their will be no constant pestering and pursuing by the creditors. They cannot take you to court too, as long as you see to the terms of your legally binding agreement.

As for payments, you will make them each month in the amount you agreed to and this includes the IVA set-up and management fees, no extra costs. Any IVA costs will be deducted from your monthly payments.

However, you should take note that individual voluntary arrangement, IVA is not for everyone. Therefore, you will need to consult with reputable debt advisory and management firms that deal with IVA, to see if you qualify for it.

You can get IVA advice from The Debt Advisory Service, among other firms. You just need to do your research but The Debt Advisory Service is a great place to start.

Debts Included In an IVA

Some of the most unsecured debts can be easily included in an IVA. Here they are:

  • Jointly owned debts
  • Credit cards and loans
  • Debts to HMRC
  • Money owed to friends and family
  • Utility arrears
  • Arrears to trade suppliers for the self-employed individuals
  • Council tax arrears
  • The shortfall from property repossessions

Debts Not Included In IVA

  • Student loans
  • Child support or maintenance arrears
  • Traffic violation fines or court fines

Benefits of an IVA

Here is how an IVA can help you when you are in debt:

  • An IVA can offer you an affordable payment plan by ensuring first that you are able to meet your daily or monthly expenses like food costs, rent or mortgage, travels expenses and even clothing while paying your debts. However, these priority expenses need to be within reasonable standards.
  • It will help you reduce your debts, as the remaining arrears are usually written off after the end of the IVA. This can be anywhere between 30-90%, depending on your situation and the payments you can afford to make on a monthly basis. After which, you can be declared debt free.
  • Once your IVA is approved by 75% of your creditors, then you can rest assured that the calls and letters from them will stop ASAP, IVA will take care of it.
  • IVA will definitely include all your unsecured debts in the payment plan even if some creditors refuse to participate in it. You just need 75% of creditor votes and you can bind all of them to the agreement.
  • The creditors will freeze your interest rates and any other charges, as part of the legal agreement. This is from the date the IVA is signed.
  • An IVA can protect your assets like your home from creditors, as long as you maintain its terms and conditions. Only assets you agree and propose to sell will form part of the IVA repayment plan, the rest will be protected.
  • The individual voluntary arrangement, IVA can help you avoid bankruptcy. Since you have a legally binding agreement with your creditors, they cannot make your bankrupt.

Conclusion

Therefore, depending on the nature of your debt and country of residence you can always consider IVA, as a viable option for paying off your debts.

Adam Torkildson