The Introduction
Are you dealing with financial debts that seem overwhelming? Are you finding it hard to keep up with your monthly payments and bills? If you’re struggling to take control of your finances, there is a solution that might work for you: Individual Voluntary Arrangements (IVAs).
An IVA is a legal agreement between you and your creditors that helps you to pay off your debts in an affordable manner. But what is it, and how does it work? In this comprehensive guide, we will take you through everything you need to know about IVA.
What is an IVA?
An IVA is a formal agreement between you and your creditors, which allows you to pay off your debts over a set period, typically between five and six years. This is an alternative to bankruptcy that could help you keep control of your assets, such as your car and your home.
How does an IVA work?
The first step in getting an IVA is to find an insolvency practitioner (IP). This can be done either directly or through a debt management company. Once you’ve chosen your IP, they will carry out a financial assessment to determine whether an IVA is right for you.
If they think an IVA is suitable, the IP will then contact your creditors with a proposal, outlining how much you can afford to pay each month. If creditors representing 75% of your debts agree to the proposal, the IVA is deemed to be accepted, and all your creditors will be bound by its terms.
What are the advantages of an IVA?
There are many advantages to an IVA that make it an attractive option for individuals with unmanageable debts.
Firstly, an IVA allows you to keep control over your assets. Unlike bankruptcy, you won’t be forced to sell your home or other assets to pay off creditors.
Secondly, an IVA provides an affordable payment plan, so you won’t have to struggle to make your monthly payments. The affordable monthly payments will be determined by your income and expenses to ensure that they’re affordable.
Finally, an IVA gives you peace of mind because it puts an end to any threatening phone calls, letters, and demands from your debtors. Once the IVA is set up, you’ll be able to relax and focus on getting back on track with your finances.
What are the disadvantages of an IVA?
As with any debt solution, IVAs come with some downsides.
Firstly, IVAs will have an impact on your credit score. This means that it might be hard to get credit while you’re still in an active IVA and at least six years after completing it.
Secondly, it can be challenging to obtain an IVA. Creditors representing 75% of your debts must agree to the proposal for it to be successful. This means that if one creditor rejects your proposal, the IVA will be rejected.
Finally, an IVA is a public record, which means that anyone can access information about your financial situation.
Conclusion
Individual Voluntary Arrangements (IVAs) are an excellent solution for anyone trying to deal with unmanageable debt. This guide has provided you with a comprehensive understanding of what an IVA is, how it works, and its advantages and disadvantages.
If you’re considering an IVA, it is essential to find a reliable insolvency practitioner who will guide you through the process and help you set up a reasonable payment plan.
