Individual Voluntary Arrangement (IVA)
What is an Individual Voluntary Arrangement (IVA)? An IVA is a debt solution that is designed to help people who are chronically over-borrowed to avoid bankruptcy. It will allow you to reduce the monthly payments towards your debts by a significant amount, in reality to an amount that is tailored to your individual debt situation. And ultimately will allow you to become debt free by getting large amounts of the debts written off at the end of the agreement.
In short the process of an Individual Voluntary Arrangement is as follows:
A budget is agreed with the customer where all income and expenditure is taken into account with certain outgoings like food, utilities and mortgage payments getting priority over everything else. In fact the payments to your unsecured debts are given lowest priority of all. From this a monthly payment that you can actually afford is calculated and agreed upon. Then using this payment we will calculate how much you would pay back over a 60 month period and the percentage of the current total debt that that would be. If this percentage is enough for the creditors to agree to an Individual Voluntary Arrangement (IVA) then a creditors meeting is arranged. This needs to be at least 25% of the total debt, not much to pay back is it?
At the creditors meeting the lenders will vote in favour of the IVA (or not) and so long as 75% of the creditors by value vote yes, all of your creditors will have to abide by the debt write off agreement (IVA).
The rest is then down to you, so long as you make all 60 of the revised payments the creditors have to write off any remaining debt after the 60 months is up and you are debt free.
The pros of an Individual Voluntary Arrangement (IVA)
- Reduced monthly payments
- Unaffordable debt written off
- No more interest payments
- Clear plan for debt freedom
- Creditors can no longer contact you
- 60 payments and you have no more debt
The cons of an Individual Voluntary Arrangement (IVA)
- Your debts will all be in default on your credit file
- If you fail to make all payments one or more of your lenders may file for bankruptcy
- You cannot get unsecured lending while in the terms of an IVA
- You may have to utilise equity in your house as part of the agreement
Alternatives to an IVA
There are alternatives to an Individual Voluntary Arrangement (IVA), but it is likely you would only use them if you are not eligible for an IVA. These include and are not limited to Debt Management Plans (DMPs) and Debt Relief Orders (DROs). Click the links to see more information on each.
What do DDA do?
Lower payments agreed within 24 hours
Freeze interest and charges
Debts written off
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