Individual Voluntary Arrangement (IVA) Explained – A Comprehensive Guide
Are you struggling with unmanageable debt and considering an IVA as a possible solution? At SortMyCash, in partnership with Debt Guardians, we’re here to help you understand Individual Voluntary Arrangements in depth, so you can make an informed decision about whether this debt solution is right for you.
What is an Individual Voluntary Arrangements (IVA)?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors to repay a portion of your unsecured debts over a fixed period, usually 5-6 years. Once the IVA is completed, any remaining unaffordable debt is written off.
Eligibility Criteria for an IVA:
To qualify for an IVA, you must meet the following requirements:
- Have unsecured debts totalling over £6,000.
- Be unable to afford your current debt repayments.
- Be able to contribute at least £100 per month towards your debts.
The Individual Voluntary Arrangements Application Process:
If you meet the eligibility criteria, the process for setting up an IVA involves:
- Consultation: Speak with a Debt Guardians expert adviser to assess your financial situation and determine if an IVA is suitable.
- Proposal: Your insolvency practitioner (IP) will work with you to create a tailored IVA proposal, outlining your affordable monthly repayments and the duration of the agreement.
- Creditor Approval: The IP will present your proposal to your creditors. If 75% (by debt value) agree to the terms, the IVA is approved and becomes legally binding for all involved parties.
- Monthly Repayments: You’ll make the agreed-upon monthly payments to your IP, who will distribute the funds among your creditors.
- Completion: After successfully making all required payments, your remaining unaffordable debt is written off, and you’ll be debt-free.
Advantages of an Individual Voluntary Arrangements (IVA):
- Affordable repayments: IVAs are tailored to your financial situation, ensuring monthly payments are manageable.
- Legal protection: Creditors cannot take legal action against you once the IVA is in place.
- Debt write-off: Upon completion, any remaining unaffordable debt is written off.
- Fixed duration: An IVA typically lasts 5-6 years, providing a clear path to becoming debt-free.
- One monthly payment: IVAs consolidate your debts, simplifying your financial management.
Disadvantages of an Individual Voluntary Arrangements (IVA):
- Credit rating impact: An IVA will negatively affect your credit rating for six years from the start date.
- Restrictions: You may need to adhere to strict budgeting guidelines during the IVA term.
- Equity release: Homeowners may be required to release equity from their property to contribute towards the IVA.
- Public record: IVAs are listed on the public Insolvency Register, potentially impacting your privacy.
- Failure consequences: If you fail to meet the agreed-upon terms, your IVA may fail, and you could be at risk of bankruptcy.
How an IVA Affects Your Credit Rating:
An IVA will remain on your credit file for six years from the start date, making it more difficult to obtain credit during this period. However, once the IVA is completed and removed from your credit file, you can work on rebuilding your credit score.
Why Choose SortMyCash and Debt Guardians for Your IVA?
At SortMyCash, we’ve partnered with the highly reputable Debt Guardians to provide expert advice and support throughout the IVA process. With over 1,000 reviews and a Trustpilot rating of 5.0 out of 5 stars, Debt Guardians’ friendly and professional approach has helped countless clients regain control of their finances and become debt-free.
An Individual Voluntary Arrangement can be a lifeline for those struggling with unmanageable debt. However, it’s crucial to weigh the advantages and disadvantages before committing to this debt solution. If you have unsecured debts of over £6,000 and are struggling with repayments, fill in our simple online form and speak with a Debt Guardians expert adviser today. Let us help you explore your options and find the best path to financial freedom.
Please note: An IVA may not be suitable for everyone. Fees apply, and your credit rating will be affected. It’s essential to seek expert advice to determine if an IVA is the right debt solution for your specific situation.