What is an IVA?

An Individual Voluntary Arrangement (IVA) is used to solve a serious personal debt problem by settling unsecured debts over a fixed period normally five years. You will need to pay a single amount towards your debt each month. Then at the end of the five year period any outstanding debt is written off and you are left debt free.

If you are a home owner, you will normally have to agree to release equity from your property to put towards your debt. However you will only have to release equity if there is any available and you can afford to do so based on your income and given that an appropriate mortgage is available.

Useful IVA Links:

More Detailed IVA Information

Discuss IVA's with others considering them in the Forum

IVA Documents:

Living Expenses Guide

Who are IVA's for?

If you are struggling to repay personal debt, an IVA could allow you to become debt free in five years. However, carrying out an IVA is a serious matter. You should therefore consider a number of things before deciding to go ahead with this solution.

Only unsecured debt included

Unsecured debts such as credit cards, bank loans, catalogues and even VAT or income tax debts can be included in an IVA. However, you will have to continue paying secured debts such as a mortgage on a property.

Debts of over £18,000

Generally speaking, an IVA is only suitable if the total of your unsecured debts is £18,000 and over. In addition, you will need to owe money to three or more different banks. However, if your debts are lower than £18,000 you may still be able to do an IVA. Please contact IVA Help to understand these options.

Disposable income of £200 plus

An IVA will normally only be suitable if you can afford to pay at least £200 a month towards your debts. However you may be able to pay less if you are a home owner or have a car finance agreement which comes to an end during your IVA.

It is very important that you do not agree to make a monthly payment which you cannot afford. If you fail to make your agreed monthly payments, your IVA could fail and you may be forced to declare bankruptcy.

Home owners

If you own a property, you will have to agree to release any available equity you have as part of the money which is paid back to your creditors within your IVA.

Generally you will be asked to get valuation of your property in the final year of your IVA. If there is equity that can be released at that time, given that a mortgage is available, then you will be required to do this.  If you cannot get an appropriate mortgage, you may have to extend the period of your IVA for 12-18 months.

How much will an IVA cost?

You will not have to pay any fees to undertake an IVA.

There are costs associated with an IVA called Nominee and Supervisor fees. However these are taken directly from the monthly payments that you make. As such, when you carry out an IVA, you will always be asked to pay as much as you can afford into the agreement each month. However, there will be no additional payments to be made for fees.

Should I pay an instruction fee?

There are some IVA companies who will ask you to pay an Instruction or Drafting Fee to carry out an IVA. Generally speaking this will be an additional one or two months payments at the beginning of your arrangement.

There is no need to pay an instruction fee and you should work with an IVA company who do not make this charge. Please contact IVA Help for more information about this.

What are the advantages and disadvantages of an Individual Voluntary Arrangement?

Advantages

Single monthly payment - An IVA will allow you to reduce the monthly payments you make to your creditors to a single affordable amount. You will always be asked to pay as much as you can afford but have enough each month pay comfortably pay for all of your reasonable living expenses.

Debt written off – At the end of your IVA which will normally last five years, any outstanding debt will be written off and you will be left debt free.

Legal protection from your creditors - An IVA is a formal legally binding agreement. As such, once in place, your creditors are not allowed to take any further legal action against you to collect the money they are owed. You are therefore protected from the risk of getting a county court judgement (CCJ) or Charging Order against your property.

Interest and charges frozen – Once your IVA has been agreed, your creditors must stop additional interest and late payment charges. This means that your debts stop increasing and you know that you will be debt free in five years.

Can be a company director – If you are a company director, you can continue to run your business if you carry out an IVA. In fact, the IVA solution was originally designed to help business people which debt problems.

Disadvantages

Home equity must be released – If you are a home owner, then you will have to agree to release any available equity from your property as part of your IVA.

Credit rating affected – Once you enter into an IVA, this will be recorded on your credit file. This will make it more difficult for you to borrow money. The record will be removed from your file after six years from the date your IVA started.

Failure may mean bankruptcy – If you start an IVA but then are unable to maintain the agreed payments, the arrangement may fail. If you are a homeowner, you may then be forced into bankruptcy and you home will be at risk. It is therefore very important not to enter into an IVA unless you are happy that you can afford to make the agreed payments.

© IVAHelp.org 2010
Owned and operated by Wilmott Turner Financial Services Ltd
Consumer Credit License 630668 / Data Protection Reg No. Z2180863

Content Management Software
Hosting by Impresoft
Design by Visual Marketing