Originally introduced to help people with serious financial problems, IVAs quickly became a widely used debt solution in the UK. Join us as our experts answer some of the most frequently asked questions about individual voluntary arrangements.
What is an individual voluntary arrangement (IVA)?
An IVA works by fixing an affordable amount that you have to repay every month. To apply for an IVA, you need to table it to your creditors in the form of an IVA proposal. You will also require the services of a licensed insolvency practitioner (IP) to negotiate your IVA.
Your IVA will come into effect and become legally binding if a majority (75% by debt value) of your creditors approve of it. You do not need the individual consent of all your creditors.
Find out: If an IVA will work for you?.
Is an IVA a good idea?
Generally, IVAs are considered worth it because they are legally binding, time-bound, and can be used to write off debt in some cases. Whether or not an IVA might be a good idea for you depends on your debt level and individual circumstances.
How badly does an IVA affect credit rating?
An IVA may negatively affect your credit rating – but not permanently. Besides, not doing anything about your financial situation, making late payments, or missing them altogether will also make your credit score plummet.
How much does an IVA leave you to live on?
Your IVA payment will be calculated by subtracting your basic living costs from your income. This is done to ensure that you have enough to live on while your IVA lasts.
For example, if you are earning £3000 and your monthly living costs are £2800, the payment you make towards your IVA should be £200.
Can I pay IVA off early?
Yes. You can pay off your IVA early by pitching a lump sum amount to your lenders as a one-time payment. Your IP can do this on your behalf. If a majority of your creditors agree, you can settle your debt and finish your IVA earlier.
What happens when you finish your IVA?
Once the overall duration for your IVA ends, your outstanding debt will be written off. You may be able to write off up to 80% of the debts included in your IVA and begin afresh.
Read our detailed guide on IVAs to learn more.
What is the downside of an IVA?
Individual voluntary arrangements are formal and long-term which means that they will usually remain on your credit file for at least a year after your IVA has been closed. This adds up to 5-6 years during which you might find it increasingly difficult to obtain credit or enjoy other financial products.
Is an IVA worth it?
An individual voluntary arrangement might be worth it if your debt exceeds £10,000, you have two or more creditors and you can afford to make monthly payments towards your IVA.
If you meet these criteria, you should seek IVA help from a debt expert to accurately determine whether an IVA will be worth it for you.
Money Advisor: Swift Debt Help & Relief
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Money Advisor is committed to helping people get out of debt and manage their finances in a better manner. If you or your loved ones need IVA debt help, you can count on us.
We can help you get out of debt and regain control of your finances. Get in touch with our friendly and impartial specialists for help with debt.