Do you want to avoid insolvency because of your uncontrollable debt? You can think about the IVA (Individual Voluntary Arrangement). Before knowing what is an IVA, you have to find out if this option is available in your state. In simple words an IVA is a formal agreement between creditors and an individual. This agreement will highlight how a person can pay back money to their creditors.
Understand procedures of an IVA
An IVA freezes your debts and permits you to pay them off over a specific period. After this period, the remaining money (you owe) is written off. If you are eligible to pay something toward debts (not the full amount your creditors want), you can get the advantage of an IVA.
To start this procedure, you have to contact an insolvency practitioner. It is essential to show that you have a regular income (long-term) to cover repayments over 60 – 72 months. You can qualify for IVA even with a lump sum amount to pay for your debts. A qualified insolvency practitioner can set up IVA for you. He will prepare a proposal to take approval from your creditors.
Remember, the process of an IVA will depend on your circumstances. It is a legal agreement between you and your creditors. After signing this agreement, you and your creditors can’t back out from its terms. An IVA is suitable for different common debts, such as:
- Personal loans
- Overdrafts
- Catalogue debts
- Hire purchase debts
- Council tax arrears
- Store and credit cards
- Mortgage shortfalls
- Money owed to customs and revenue, such as national insurance contribution or income tax
Unfortunately, an IVA is not suitable to pay off magistrate’s court fines, student loans, car finance, child support or maintenance arrears. Technically, you can pay off rent and mortgage arrears and other property loans with an IVA. Your creditors must agree to this plan.
Tips to set up an IVA
If you want to set up an IVA, make sure to contact an insolvency practitioner. You have to pay fees to a qualified practitioner. This fee can be taken from your monthly payments. Avoid paying up-front charges before setting up an IVA. Feel free to discuss things with an experienced adviser before taking out any IVA. Debt advisers may help you to make the right decision.
Right time to take an IVA
With extra monthly income (at least $100), it is possible to get the advantage of IVA. Numerous creditors may not accept payment less than $100. With more than one debt, you will need extra money. Sometimes, you will get a chance to sell something valuable.
Creditors can overlook your regular income or extra income if you have some valuable assets. You can sell this expensive to pay a lump sum. In short, a person with a debt burden and valuable asset or regular income may qualify for this agreement.
Is it a good option for you?
IVAs may be a flexible option if you have money to repay multiple debts. It will help you to decrease monthly debt to almost 70% with an IVA. This agreement will offer you needed protection against the actions of creditors. Remember, IVA helps you to avoid petitioning for bankruptcy, auctioning property, etc.
They can be expensive in the long-run and may have some cons. For example, you can’t make contributions in pension payments during this agreement. It can be difficult for you to save money. Moreover, you will be forced to re-mortgage equity or home.
The individual voluntary arrangement may affect your ability to get a new job. Potential employers can get access to an IVA. It will appear on your credit report for almost six years. For this reason, evaluate each aspect of an IVA before using this option.
