Individual Voluntary Arrangements (IVA's)
Considerations:
Credit rating
The first consideration to think about in deciding to request an individual Voluntary Arrangement is your credit rating.
On entering into an IVA the credit reference agencies will register a default against your name for the different debts.
The affect of a default on your file will make it more difficult to secure alternative credit arrangements for one year after the IVA has completed.
At the end of this period your credit file will be similar to an 18 year old getting credit for the first time.
If arrears and defaults already exist on your credit file then in practical terms the adoption of an IVA will make no material difference to your credit file.
Length of Arrangement
The second consideration to think about is the speed with which you want to be completely free from debts.
With an IVA the majority of arrangements are settled over a five year period.
It is possible to alter the terms of an IVA and go for a lump sum settlement part way through the agreement.
In all likelihood however you will be contractually bound to make payments for five years.
Sustainability
A third consideration to think about is the sustainability of an IVA.
In entering into an agreement you are creating a contract which is expected to last for five years.
At the end of this period you will be debt free.
If you believe from the outset that some factor will jeopardize your ability to service an IVA it is probably best not to enter the agreement in the first instance.
Whilst it is possible to miss payments in an IVA (provided they are made up) were you to break the terms of the agreement altogether you can be forced into bankruptcy.
Homeowners
A forth consideration in entering into an IVA relates specifically to homeowners.
Where a homeowner enters into an IVA a term of the proposal could possibly be to include an agreement to re-mortgage your property at the end of the IVA.
This is an IVA can be accepted at a lower monthly payment. In determining whether this can be included as a term; equity less than £5,000 is excluded.
If a house is jointly owned equity of £10,000 will be excluded.
Above this amount a proportion of the value of your property could be included in the proposal.
Windfall gains
A fifth factor which also needs to be thought about is the effect a windfall gain could have on your proposal.
In most IVA proposals a provision is included so that a proportion of any windfall gains are paid to your creditors.
In practice this means a large lottery win would create an entitlement or more ordinarily a major pay rise (significantly over inflation) can create a need to pay your creditors a larger amount.
Costs
The costs of an IVA depend entirely on the amount of disposable income you have.
Disposable income in this context means the amount of income you have left over after your essential expenditure.
Guidelines exist on the amount creditors will normally accept for essential expenditure.
Based on this it is only possible to give minimum guidelines.
Use our FREE Credit Report to see if you are eligable for an IVA.
IVAs: Main
IVAs: Criteria
IVAs: Considerations
IVAs: Costs
IVAs: Merits