What is an IVA?

IVA stands for individual voluntary arrangement. An individual voluntary arrangement is a legal agreement between you and people you owe money to (your creditors).

Initially introduced as a formal solution for borrowers struggling with debt, IVAs are now one of the most widely used debt solutions in the UK.

How Does an IVA Work?

An IVA works by establishing a payment plan that condenses multiple debts into a single monthly payment.

When you enter an IVA, you agree to repay a portion of your debt over a set period of time (usually 60 months) in the form of affordable repayments.

How to Apply for an IVA?

If you think an IVA might be an option for you, the first step is to consult our debt experts. They will discuss your financial circumstances (including your income, outgoings, and debt level) with you to determine whether IVA is a suitable debt solution for you.

Once it has been established that an IVA is the best solution for you, the next step is drawing up an IVA proposal to present to your creditors.

If your IVA proposal is approved, it will come into effect and all your creditors will be bound by the terms and conditions laid out in your agreement. All your included debts would be frozen, and no interest, charges, or penalties can be added.

Being in an IVA

One of the biggest plus points of being in an IVA is that once it comes into effect, you will not be required to correspond with your creditors. Your creditors cannot pursue you for payments for any of the included debts. That means an end to intimidating letters, phone calls, and threats of legal action.

If you cooperate, pay on time and comply with the rest of the terms of your IVA, any outstanding balance with the included debts would be written off at the end of your IVA.

You may be required to cut down on your expenditure and keep it within reasonable guidelines, but the IVA proposals take into account (and makes allowances for) basic and reasonable necessities and living expense.

Types Of Debts Covered With The Help Of Government legislation

Most debts can be included in an IVA and your repayments reduced.

Loans & Overdrafts

Credit Cards

Benefits Overpayment

Council Tax

Debts with a Court Judgement

Rent, Gas and Electricity Arrears

Catalogue and Buy now, Pay later Debt

Loans & Overdrafts

Credit Cards

Benefits Overpayment

Council Tax

Debts with a Court Judgement

Rent, Gas and Electricity Arrears

Catalogue and Buy now, Pay later Debt

IVA Benefits

  • Reduced Repayments: Monthly repayment plans are based on how much you can reasonably afford to repay – not how much you owe.
  • Frozen Interest & Charges: An IVA usually results in frozen interest, charges, and penalties so your debts do not increase in value.
  • Protection for Homeowners: IVAs are a good option for homeowners because they can help you safeguard your property
  • Reasonable Solution: An IVA enables you to afford other financial commitments by covering unknown debts like unpaid tax or overpaid tax credits
  • Alternative to Bankruptcy: A viable alternative to bankruptcy if you have a trading business or are self-employed. That’s because you can continue working without any disruption.
  • Write off Debt: If you comply with the terms of your IVA and everything goes as planned, any remaining money you owe on the included debts by the end of your IVA term is written off.
  • Legal Protection: Once your IVA comes into effect, creditors cannot chase you for debt or threaten you with legal action.
  • Peace of Mind: You will find immense peace of mind in the knowledge that your monthly payments are affordable, and your creditors cannot pursue you.
  • Reinstated Financial Control: An IVA is a proactive way to take control of your debt issues and regain your financial footing.
  • Known Term: An IVA is a fixed agreement so it offers you the comfort of knowing exactly when your unsecured debts would be written off and you’d be debt-free (usually 5 years)

IVA Debt Help: Key Considerations

  • Credit Rating Entering an IVA will inevitably affect your credit score. An IVA will appear on your credit file for 6 years. That’s why you might find it difficult to apply for credit. However, if you are entering an IVA, it is highly likely that your credit score is suffering already. An IVA is the first step towards sorting your debt problem and improving your rating.
  • Property: In some cases, homeowners may be required to re-mortgage their property in the 5th year of their IVA. The equity that is released may be used to repay creditors. However, there are plenty of situations when this is not required. Instead, the IVA is extended for a further 12 months.
  • IVA’s Can Fail:  An IVA can fall apart if you are unable to comply with its terms and you fail to keep your provider updated. Should such a situation arise, it is crucial you make alternative arrangements to repay your debts – otherwise, you will be at risk of bankruptcy.
  • Eligibility and Acceptance: Only unsecured debts can be included in your IVA. Debts that are not included in your IVA remain outstanding and you need to maintain payments to these yourself.
  • Public Entry: Details of your IVA will be entered in a public register so anyone specifically looking for you in it may be able to access your record.
  • Expenditure Restrictions: Entering an IVA may result in restrictions on expenditure throughout the term of your IVA. Reasonable allowances will be in place but you will be unlikely to be free to spend excessively during the term.
  • Creditor’s Discretion: Even though IVAs have a high acceptance rate because they indicate a willingness to put your financial affairs in order, creditor rejection is still a possibility. In that case, it is possible to negotiate with your creditors to see if the IVA can be approved.

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Trading address, Initial Business Centre, Wilson Park, Manchester, M40 8WN. Debt-help.org helps individuals find solutions to get out of debt and, whilst we do not provide advice, we can help you understand all the possible options and guide you through the process.

Money Helper is an impartial service set up by the Government. They provide free debt counselling, debt adjustment and credit information services.

Trading address, Initial Business Centre, Wilson Park, Manchester, M40 8WN. Debt-help.org helps individuals find solutions to get out of debt and, whilst we do not provide advice, we can help you understand all the possible options and guide you through the process.

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