An IVA could write off up to 81% of debts and save you £1000’s
Are you struggling to pay off your debts? Are you feeling overwhelmed and hopeless? You’re not alone. Millions of people are in the same boat. But there is hope. You can get out of debt, but it’s going to take some work. Read on for information on how to get started.
What Is an IVA?
‘IVA’ stands for Individual Voluntary Agreement.
If you have unsecured debts over £5000, an IVA is a formal debt solution that people can use.
It’s particularly helpful if you are struggling with unsecured debts and want to avoid being declared bankrupt.
An Insolvency Practitioner (IP) will be appointed to your IVA. An IP will draft up a repayment proposal which outlines your financial situation.
The proposal will be discussed with your creditors at the ‘meeting of creditors’. 75% of your creditors will have to agree to the terms in order to be accepted into an IVA.
During the period of an IVA you will make bitesize repayments over the course of between 5-6 years. At the end of the term any payments that are still owed are written off.
An IVA is a legally binding agreement meaning, your creditors cannot back out of it. Creditors also can’t make any adjustments to the terms after entering the IVA agreement.
Creditors HAVE to write off any debts that are not paid after the IVA term.
- Creditors and bailiffs are no longer allowed to contact you for repayment once entered into an IVA.
- Creditors must freeze interest charges on any debts.
- It's important to note that an IVA will not affect your credit rating for 72 months. An IVA may affect your credit rating after this period.
Pros and Cons of an IVA
Pros
- Reduce your debts into one monthly bite-size repayment.
You will be provided an allowance for key expenditure like rent, food and energy bills.
- Fixed repayment period.
With an IVA you know where you stand and the contract is legally binding. Typically repayment lengths range from 5 – 6 years. However, the length of the IVA will depend on the number of creditors owed.
- An IVA will protect you against your creditors.
Creditors will no longer be able to contact you regarding missing payments. This includes any bailiff activity, CCJs, attachment of earnings and charging orders.
- Assets you own can have protection guaranteed.
This is subject to the creditor’s approval, it will mean there is no risk to your home or assets of reasonable value.
- All interest is frozen upon approval of the IVA.
The interest on the debts you owe will no longer increase. Interest is frozen at the time you enter an IVA.
Cons
- Your expenditure will become less flexible. You will need to abide by strict IVA guidelines set out by the IP.
- Any modifications to the IVA may result in the duration of the IVA being extended. You are always made aware before any changes are made.
- Fees to be paid to the Insolvency Practitioner.
As part of the IVA monthly payments fee could be paid to the IP. However, the fees are included within your monthly repayments and will not be hidden to you.
- Your occupation may be affected.
It is important to check with your employer to ensure there is no impact on your employment position. It is sometimes possible for an IVA to have an indirect impact on your occupation.
- 75% of your creditors must support the IVA in order for acceptance.
75% of creditors have to agree to the terms in order to initiate a successful IVA. This process is known as the ‘requisite majority’.
What to do If your IVA application is rejected?
Don’t stress, there are a few options available to you if your IVA is rejected by your creditors.
The first thing to do is look over the terms of the agreement you are proposing.
In a lot of cases, your creditor will tell you straight away if your terms are not suitable for them and they will outline where they need adjusting.
If you are prepared to make these changes, your creditors should then accept your IVA.
However, if you are not prepared to agree to the terms laid out by your creditors there are a few other options.
- You could look at trying a debt management plan.
This is a ‘softer agreement’ between you and your creditors that would be agreed by both parties.
It helps pay off your debts to your creditors the same way an IVA would but would not be legally binding meaning you do not get the protection that an IVA offers.
- A debt consolidation loan.
This is a loan that can be used to pay off all of your creditors at once.
The benefit of doing this is that you would be only dealing with one creditor, not a handful of creditors.
- A Debt Relief Order (DRO) A DRO is a unique type of ‘mini-bankruptcy’ ; however, only a handful of people qualify for this type of debt help.
You need to have less than £30,000 worth of debt and be earning less than £75 a month to qualify.
How does an IVA work?
An IVA is broken down into 3 stages.
Qualification
Complete our free solution finder. We’ll understand your circumstance and then create the best solution tailored for you. If we believe you fit the criteria for an IVA you will be alerted by one of our specialists.
Quick Chat With Our Specialist
Our friendly specialists will have a 5 minute discussion of your situation and run you through your options. This process is 100% free and confidential.
Your Choice
If we believe an IVA is the best solution for you, our specialists can help with an IVA. This will put you on the path to becoming debt free!
not sure on the best solution for you?
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Find Your Solution
(These are some hypothetical examples of clients using an IVA)
£11000 In Debt
Sean Anderson
£14370 in Debt
- Council Tax
- Credit Cards
- Mortgage Arrears
Previous monthly payment: £740pm
New Payment
£
0
Per month
Daniel O’Brian
£6500 in Debt
- Credit Cards
- Payday Loans
- Court Judgements
Previous monthly payment: £510pm
New Payment
£
0
Per month
Chloe Doran
£31000 in Debt
- Credit Cards
- Mortgage Arrears
- Payday Loans
Previous monthly payment: £1100pm
New Payment
£
0
Per month
These are just a handful of the creditors we can help you with
(list of creditors)
IVA
An IVA is a solution for people with over £5000 worth of debt, you must also owe more than one creditor. An IVA is a legally binding agreement which can help write off up to 81% of debts over a 5 or 6 year period. Sometimes more depending on the number of creditors involved.
Debt Management Plan
A Debt Management Plan or DMP, is an informal agreement between you and your creditors to pay back lower priority debts, this will reduce your monthly outgoings to an affordable figure each month.
Bankruptcy
Bankruptcy is a formal solution designed for those who physically cannot repay debts. Bankruptcy is often viewed as the last resort but can be a good solution for those who cannot make any repayments.
Don't know where to start?
No need to worry – we’re here to help you figure it all out.
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The Money Advice Service is a free and impartial organisation, created by the Government, with the goal of
providing debt counselling, debt adjusting and credit information services to those in need. Individuals can
get professional free advice on how to manage their financial burdens by visiting www.moneyadviceservice.org.uk
