Individual Voluntary Arrangements (IVAs)
What is an Individual Voluntary Arrangement (IVA)?
Individual Voluntary Arrangements (IVAs) were introduced by the Government in 1986.
They provide a way for people to deal with their debts with fewer potential long term consequences than bankruptcy.
An IVA is a legally binding agreement between you and the people you are struggling to repay (your creditors).
All of your unsecured debts can be included; these may be credit cards, store cards or loan companies.
The IVA typically lasts for a period of up to five years.
What does an IVA involve?
The arrangement involves you making one affordable monthly contribution towards your debts.
This continues for the length of the IVA, after which any outstanding debt is written off.
The amount written off depends on your individual circumstances and can be as much as 60-70% of the debt
included in the IVA.
Additionally, interest on your debts will be frozen and creditors should not contact you asking for money.
Things you own, such as your home, can be protected under the IVA.
Advantages of an IVA
- All interest and charges are guaranteed to be frozen on acceptance of an IVA
- Possibly write off as much as 60-70% of your unsecured debts
- Be clear of debts included in the arrangement after 5 years
- Fees are incorporated into the monthly contributions agreed with your creditors
- No more threatening letters or bailiff/court action.
- You will NOT lose your home
- It is a legally binding contract so the creditors can't back out as long as you maintain the payments set out in the contract
Disadvantages of an IVA
- You must have debts in excess of £12,000
- You must be able to afford to pay back at least £200 per month.
- You cannot get credit for the length of the IVA
- Your credit rating will be affected for another year after the IVA is complete
- Homeowners may have to re-value their homes in the 4th year and release equity to cover debts
if the value has increased