An Individual Voluntary Arrangement is a legally binding agreement between you and your creditors which will normally last 5 years. You will then be expected to pay anything that you can afford outside agreed reasonable living costs. An IVA has to be set up by a licensed professional called an Insolvency Practitioner (IP) and all unsecured debts must be declared into an IVA. The IVA will be monitored during the full term to ensure that the terms and conditions that were agreed between both parties are adhered to. It is your responsibility to pay the IP who will then ensure that the creditors receive the agreed payment.
An IVA helps people in financial difficulties to form a plan to settle their unsecured debt within a reasonable time-frame. Creditors will not be allowed to demand additional payments and all interest and charges will be frozen.
Everything is based purely on what is affordable to you each month; this is calculated before any agreement takes place and is based on your monthly income and expenditure. Your financial situation will be reviewed annually to see if there has been any change in circumstances. Once the final payment is made, any outstanding debt is legally written off, which can sometimes mean a significant portion of your unsecured debt, sometimes as high as 75%.
If you are a homeowner your home is never at risk however, in some cases, at the end of the 5 years you may be required to release some of the equity in your home to cover any outstanding unsecured debts.
National Debt Advice uses some of the best debt management consultants in the UK to decide whether an IVA is right for you. Once a decision has been made, your consultant will be required to give you an assessment of your current financial situation. This information must be as accurate as possible in order to calculate the most precise repayment amount for you. Your creditors will then be asked to vote either for or against the approval of your IVA.
The IVA that you sign up to is legally binding and therefore you must keep up with your repayments. The good news is, as soon as your agreement is finished, you will be free from debts regardless of how much is paid off.
Any person in debt can consider an IVA. An IVA can be set up for anyone with any type of profession, as your ability to undertake an IVA is not determined by your job but you must be incapable of repaying your debts.
Usually your personal debts must be above £15,000 and you should have 3 or more different creditors but this can depend on your personal circumstances. You must also be able to offer a reasonable monthly payment to your creditors. This will vary depending on individual circumstances and debt amounts.
These include but are not limited to:
These will normally involve secured debts:
National Debt Advice uses trained advisors to give advice on Individual Voluntary Arrangements and recommend the most appropriate action for your needs – whether that is an IVA or another solution. For more free advice on IVA’s or any other debt related issues, please take a few seconds to fill out the simple enquiry form on this page.
