What Is An IVA?

Being in debt can leave anyone anxious and troubled, especially if there’s no doable solution in sight.

Choosing the best repayment plan when you have debts to pay off can be an equally difficult thing to go through much less decide on, especially since there are a variety of options to choose from.

The amount of money and assets you have, as well as how much you owe, will most likely influence your decision.

That’s where getting an IVA can be helpful. An Individual Voluntary Arrangement (IVA) is one alternative for those who are struggling to make their payments and are at risk of defaulting on their debts (IVA).

This is a contract between you and your creditors that allows you to pay off your obligations on a fixed period and at an affordable amount. So, if you think this is for you, then read on to find out more about the advantages, disadvantages of an IVA, the financial information and details of this debt solution, and how you can go about applying for one.

What is an Individual Voluntary Arrangement (IVA)?

Individual Voluntary Arrangements (IVAs) were created as a viable alternative to bankruptcy, allowing you to pay off your obligations at a pace that you can manage while also safeguarding your possessions.

It’s a legally binding agreement between you and your creditors in which you agree to repay a specified amount of money over a set period of time, typically five years.

At the end of the IVA, all unsecured debts can be cancelled. You’ll obtain protection from your creditors taking further action against you and some of your debt will be written off if you actually manage to stick to the IVA you got.

How an IVA works

IVAs are insolvency solutions that can have a wide range of effects on your financial condition. From the time the agreement is made, your credit rating will be affected for roughly six years. You will also be listed on the Individual Insolvency Register in England and Wales, or the Register of Insolvency Arrangements in Northern Ireland, while your IVA is being processed.

In order to maintain your IVA in line with your provider, you must stick to a budget, and if you miss any payments, your IVA can be extended to cover the arrears. So, it’s best to stick to a doable payment plan so you don’t owe money over a longer period of time.

You’re unlikely to be forced to sell your property, but remortgaging your home could be a good way to get rid of some of your equity. The approval of your IVA may also be subject to specific requirements or amendments from your creditors. Changes to your IVA proposal that your creditors request are known as modifications.

The creditors’ meeting might be postponed for up to 14 days if you need more time to consider the changes. Your IVA will be granted on the day of the creditors’ meeting if you agree to the changes.

Why would someone choose an IVA?

If you’re tired of trying to figure out how to solve your debt issues or tired of dealing with any unsecured debt, an Individual Voluntary Arrangement (IVA) is an easy, doable way to solve that. Let’s look into the pros and cons of applying for an IVA here:

Pros of an IVA

Because an IVA is a legally binding agreement, creditors must adhere to it — they can’t take any further action against a borrower while they’re making payments, such as requesting a County Court Judgment (CCJ).
An IVA is only valid for a certain period of time, so repayments are only required for that period. For those who believe they can stick to a budget, this is a good option.
The debts will be dismissed once the payback time has ended, so you won’t owe money to creditors, even if there is still a balance to pay.
Three months after the IVA ends, the IVA will be withdrawn from the Individual Insolvencies Register.

Cons of an IVA

Because an IVA must be set up by a competent and licensed Insolvency Practitioner, it might cost a lot of money. Each time a payment is made, these fees normally include a set-up fee as well as a processing fee.
If the IVA fails and monthly repayments aren’t made, this could lead to bankruptcy if circumstances change (e.g., a fall in income or an increase in expenditure).
The agreement may preclude an accountant or solicitor from continuing to work if they receive an IVA.
Since a personal pension qualifies as income, using an IVA may necessitate the use of it towards the repayments.

Which debts can you pay off with an IVA?

Catalogue Debts
Council Tax Arrears
Credit & Store Cards
Hire Purchase Debts
Mortgage Shortfalls
Money you owe to HMRC (i.e. Income Tax or National Insurance contributions)
Overdrafts
Personal Loans

Which debts can’t you pay off with an IVA?

Child Maintenance or Child Support Arrears
Certain Types of Car Finance
Magistrates’ Court Fines
Social Fund Loans
Student Loans
TV Licence Arrears

Types of IVA

Not every IVA is the same – it’s catered to your needs, requirements, and ability to pay. It’s also highly dependent on the debt it has to cover. Let’s look at the different kinds available here:

Self-employed IVAs

An IVA for a self-employed person is the same as an IVA for a salaried worker. Based on your income and expenses, the insolvency practitioner will put together a monthly payment plan that’s manageable. There are, however, certain differences to be aware of:

Self-employed IVAs are usually intended to be more adaptable, which is especially useful for enterprises that rely on a seasonal income. To help the insolvency practitioners figure out how much you can contribute, you’ll need to prepare a cash flow statement.
You can pre-agree with the creditors mentioned in your proposal if you require credit to continue running your business throughout the agreement. This will be done in accordance with a set of rules and guidelines. Business credit is usually granted if it is repaid within 30 days or according to the terms of the invoice.
A self-employed individual may require an unsecured creditor to continue to supply products or services in the future, and including this creditor in the IVA may have a negative influence on the ongoing business relationship. It’s possible to ask that certain trade creditors be excluded from the IVA and receive continued payments towards their obligations in specific instances.

Joint IVAs

Once creditors have accepted the IVAs, couples can create two IVAs that are handled as one. Both agreements will involve joint debts. Through the IVAs, the household is able to make a single, manageable payment to all creditors.

Full and Final IVAs

If you wish to make a one-time payment to your creditors as a full and final settlement, this is an option for you.

Additionally, you have sufficient resources or are in the midst of selling an asset that will release funds for your unsecured creditors, this could be a viable choice.

This option is also available to those who have a family member or a friend who’s willing to contribute enough money to cover the entire IVA.

Who qualifies for an IVA?

Your personal circumstances will highly affect your IVA qualification. It’ll be possible to apply if you meet the certain requirements and financial situation.

Find out if you’re qualified for an IVA here

How to set up an IVA

An insolvency attorney must help you set up an IVA. Before your IVA is set up, you may have to pay a fee up advance. Depending on the IVA supplier, these can vary significantly. You’ll also have to make a monthly payment to keep track of the IVA.

You’ll also have to pay a charge to the insolvency attorney, which is normally deducted from your monthly payments. It’s always a good idea to get help from a free debt counselling agency. If you want to choose an IVA provider on your own, they should be able to recommend one to you and explain the various costs and charges.

Learn more about IVAs here

How Much Does an IVA Cost?

In an IVA there are three different types of fees to be aware of, however, all will be taken from your monthly payments with no surprise charges at the end of your arrangement.

Nominees Fee

In most cases, a minimum of £1,000. This includes assessing your present financial condition and making a repayment offer to creditors as part of your IVA plan. During the procedure, it also covers the costs of administration and facilitation.

Supervisor’s Fee

A fixed fee may be imposed in some situations, but typically ranges from 15-20% of the total amount paid. This includes all aspects of the IVA’s administration, such as collecting and disbursing monthly payments, dealing with any questions, conducting an annual review, and maintaining creditor relations.

Disbursements

Each case is usually worth £1,200. Software licenses, insurances, and laws that are required are paid to third-party companies. This cost could also include payments made for additional services provided in order to maximise your creditor’s return.

Cancelling an IVA

It is possible to cancel your IVA before it expires, but this is something to think about carefully. If you’re considering cancelling your IVA, the first thing you should do is talk to your IP about your situation. They may be able to assist you in resolving any issues you are having.

You must write to your IP to cancel your IVA. Your IVA will then be terminated, and you will be disqualified. You’ll need to do the following if this happens:

Organise the payment of each of your creditors’ debts. You’ll still owe them the rest of the money. If your IVA is terminated early, your debts will not be forgiven.
Pay your IVA provider for the work they’ve done so far.

As long as your creditors do not serve you with a “statutory demand” to inform you of their plans, a failed IVA will suffice. If your IVA doesn’t work, the best way to prevent bankruptcy is to contact all of your creditors as soon as possible and immediately negotiate repayment.

Your responsibilities when the IVA starts

Your creditors have the right to terminate your IVA if you do not make your monthly payments on time. Your creditors may take additional action against you if your IVA is terminated. They could sue you or declare you bankrupt.

If your financial condition deteriorates, such as if you lose your work, inform your IP. If your creditors agree to cut monthly payments, they might be able to persuade you.

How does an IVA affect credit history?

The Individual Insolvency Register, an online database utilised by credit reference organisations to update your credit rating, will include your IVA. If you have an IVA, it will be more difficult for you to create new bank accounts, receive loans, or buy on credit.

Upon completion of an IVA, it will remain on a credit record for a period of six years. This information will be added to the report once the IVA is completed. Upon conclusion of the case, the Insolvency Practitioner will transmit a certificate of completion to the insolvency service, which will notify credit agencies of the change.

Unless the credit is for utilities such as water, electricity, or gas, formal permission from the Insolvency Practitioner is required while an IVA is still ongoing.

Lenders may be less hesitant to lend to you if you have a completed IVA on your credit record, as it demonstrates that you have had problems paying payments in the past. There is no such thing as a ‘credit blacklist,’ but it may take time to demonstrate a history of prudent borrowing if you have a completed IVA on your credit report. Your position will improve if you make your payments on time, don’t go over your credit limit, and don’t use your accounts to their limit on a frequent basis.

Can I get a mortgage with an IVA?

It can be difficult to get a mortgage right away if you’ve had an IVA. Waiting six years for your credit reports to be removed is the best way to get a mortgage.

It’s possible that certain specialist lenders will look at your application before then, but you won’t get a higher rate until you’ve rebuilt your credit and proven to lenders that you are a good candidate.

Taking out an IVA, on the other hand, can be a crucial first step in regaining credit management.

Is an IVA Worth It?

Whether you wish to pay off some of your debts, have several creditors who owe you money to, or can’t afford to pay your debts on time, you may want to look into applying for an IVA. This is a great way to get debt free since all you have to do is settle on an affordable monthly payment plan.

You just have to check your eligibility to see if you can apply for one or learn more about the IVA process and IVA benefits on our post here.

How does an IVA affect your life?

Debs are enough to make anyone stressed out and uneasy. Thankfully, IVAs exist so that you won’t have to worry about debt affecting your essential living costs since it allows you to cover the fines in affordable regular payments.

However, any future income or assets you receive may be affected if you have an IVA. If you decide to sell your house while you have an IVA, for example, any proceeds from the sale may have to be paid into the IVA.

You must notify your insolvency practitioner if your income increases while you are in an IVA. That way you can get the proper debt help and debt solutions without harshly affecting the essential costs you have to pay.

What if you can’t keep up with payments into an IVA?

If you don’t make your payments on time, the insolvency practitioner can revoke your IVA and file for bankruptcy.

It’s crucial to note, however, that not all cancelled IVAs result in bankruptcy; if the IVA fails, individual creditors may consider bankruptcy as a last resort.

Get free advice about setting up an IVA

Before you decide to take out an IVA, it’s usually a good idea to talk things over with a professional debt advisor. This is because the ideal debt solution for you may or may not be this one, depending on your unique circumstances.

Get free debt help and debt advice today with us today

Debt counsellors give money advice service that can assist you in making the best financial decisions so that the majority of your money is used to pay off your debts. As a result of this free debt help, you might be able to get out of debt sooner than you imagined should you choose to follow the debt advice.

Summary

Personal circumstances are always the main root of debt problems, but getting out of debt no longer has to be difficult or impossible. By talking to a debt management company or an insolvency practitioner, you can get the best debt solution that fits your particular circumstance.

Your Insolvency Practitioner will handle the arrangement on your behalf during your IVA, taking on a number of responsibilities like handling monthly payments and distributing them among your creditors.

It’s critical that you keep the Insolvency Practitioner informed about your current circumstances. You must notify the IP as soon as possible if your financial situation changes so that they can examine your agreement and make any required revisions.

After receiving debt advice, three-quarters of those who receive it feel more in control of their finances. You can talk to someone today, either online or over the phone if you’re having financial difficulties. Our experts can assist you in resolving your financial issues as soon as possible.

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IVA Debt Help Information

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