Your Complete Guide To IVAs
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IVA Advice You Can Trust
If you search the internet you may come across many sites offering to wipe out all your debts using an IVA. No wonder you want to find out more about it. This website is here to give you the information you need so that you can decide whether an IVA really may be able to help you or not. Most other websites on this subject represent companies that are very keen to set up an individual voluntary arrangement for you. They are eager to do this because they get well paid for setting up these agreements. This is why you need to be sure that their incentive to earn money is not clouding their judgement.
That is where we come in. We do not offer to set up debt solutions for you, but can provide you with recommendations for a range of the most reputable companies to approach for help. What we want to do is arm you with the knowledge you require first, so that when you do contact any debt management companies you do so with your eyes open about what to expect and what the options are. We will tell you about the potential disadvantages of individual voluntary agreements and well as the benefits, which is something you will not get from someone trying to sell you it.
What Is An IVA?
You have perhaps heard of an IVA but may not be sure exactly how it works. Here are the key facts about it. The most common form of debt solution is a debt management plan, which you may well have come across. These are informal agreements and are designed to help you pay back everything that you owe. An IVA is a completely different type of payment plan. To start with, it is a very formal agreement, so when you sign up for it you are agreeing to be legally bound by its terms for the duration of the arrangement. The other big difference is that it is meant to deal with debts that you cannot pay back, so you end up writing off quite a lot of what you owe.
The main process is that once you have agreed that you want to set up an agreement, an insolvency practitioner will arrange a meeting with all your creditors and they will vote on whether they agree to it being set up or not. This is where there is another big difference between these and debt management plans. If you get creditors who represent at least 75% of your debts to agree to the IVA, the remaining creditors are bound by it too. This is a really useful way of ensuring that you deal with all of your debts at the same time, rather than going through an IVA and still having some debts left over.
Once your creditors agree, the insolvency practitioner will work out how much you can afford to pay each month and this will be the amount you pay for the duration of the agreement, which is normally five years. This will not be enough to pay off everything you owe, so when you get to the end of that period any debts that are left unpaid get written off and you are debt free.
Who Can Get An IVA?
Having debt written off obviously sounds very attractive, but you cannot get an IVA just because you would prefer not to repay what you owe. The individual voluntary arrangement was created in the 1980s as an alternative to going bankrupt. For it to be viable, you do need to be in a very serious financial crisis. There is no legal minimum on how much debt you can have, but debt companies will set their own limit because the costs involved in setting them up are so large that it is just not worth it below a certain amount. In general you will find that you need about £15,000 worth of debts to qualify.
You must remember that your creditors need to vote in favour of setting it up, which they are not going to do without good reason. They are effectively voting in favour of not being paid back in full, so why would they do that? The only reason they will be in favour of the IVA is if they can see that if they do not use the agreement to get something back, they may end up getting nothing back because you go bankrupt. The details of your finances will need to be made transparent to them so that they can see that your only alternative is bankruptcy. So if it is obvious that you do in fact have enough money to pay back what you owe, they are never going to vote for setting up the arrangement. The debt company that you approach will assess your finances to see whether you are in an appropriate position for an IVA or not.
Benefits Of An IVA
- You could have over half of your debts written off.
- Your only alternative will be bankruptcy, which has far more stigma attached and longer lasting consequences.
- You only have one monthly payment to think about and this should be based on what is affordable for you.
- It is legally binding on your creditors, so any reluctant ones can be made to join in and none of them are allowed to pursue you for debts once the arrangement is in place.
- Compared to bankruptcy, you are more likely to keep your home and will be able to continue in your trade or work.
Disadvantages Of An IVA
- You normally need to have debts of at least £15,000 for it to be viable.
- You can only include unsecured debts, so you can not use it to cover things like a mortgage or council tax arrears.
- You need to make substantial regular payments towards your debts so it will only be viable if you have a steady source of income.
- If you do not keep up with the agreed payments, you can still be made bankrupt.
- The fact that an IVA is legally binding has advantages, but you need to be aware that this is also binding on you, so you cannot just stop the agreement if you change your mind, or if your circumstances change. If you came into money, for example, you would need to use at least part of this to pay your debts.
Conclusions And Recommendations
If you have read through the information above and you think an IVA may be appropriate for you, the best thing to do is get advice from a reliable debt management company. They will assess your circumstances and advise you as to what the most appropriate solution is, which may include setting up an individual voluntary arrangement.
Be careful about which companies you go to, as some will try to steer you into plans that are more in their interests than yours. You can avoid this by sticking to companies with solid reputations who have evidence of being properly licensed and good track records of success.
Complete the online form below to apply to 123DebtSolutions, who are our top recommendation for debt advice. An advisor will get in touch very quickly to get more details and advise you on the best way forward.
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Your home may be repossessed if you do not keep up repayments on a mortgage, loan or any other debt secured on it.
Think carefully before securing other debts against your home.
Repaying debt over a longer period may increase the total amount to be repaid.