How to Become Debt Free with an IVA 

Imagine the freedom of knowing that your debts are under control, you are paying them back in sums you can actually afford each month and that you won´t get any more calls or letters from your creditors.

An IVA (Individual Voluntary Arrangement) maybe be an option as a way to clear your debts. If you have several debts that you are struggling to pay a government approved IVA scheme could be a way forward. 

An IVA is a manageable way to pay off large sums of money that you owe, with any remainder of the debt being written off after the agreed payment term (usually 5 years). 

If you have debts with several creditors that total £5,000 or more, don’t want to deal with your creditors directly and have approximately £100 per month spare read on...

Which debts can an IVA help pay off? 

IVAs can be used to help pay off credit cards, store cards, loans and overdrafts. These are known as non-priority debts. 

An IVA can also pay off priority debts, such as household bills (gas, electricity, council tax) and possibly mortgage or rent arrears. 

The important thing to remember is that your creditors must agree to you paying your debt with an IVA. 

Debts that cannot be included in an IVA are child support arrears, maintenance arrears by court order, student loans or magistrates court fines.

How to apply for an IVA

To apply for an IVA you should use a government approved Insolvency Practitioner (IP). The IP will liaise with your creditors on your behalf so you don´t have to deal with the stress of making phone calls and writing to the companies you owe money to. 

To find a government approved IP visit 

https://www.gov.uk/government/organisations/insolvency-service 

Once you´ve made contact with the IP they will ask for details of all the debts you have and your income and outgoings. You will also have to declare any items of value you own, including vehicles, land, property, antiques or anything that could be sold to reduce your debts.

The next step of the IVA application process is for the IP to approach your creditors on your behalf and make a payment proposal. This proposal to reduce your debts is agreed between you and the IP prior to them speaking to your creditors. The payment proposal is unique to your individual situation and will often be less than the minimum payments your creditors are asking for. 

The average payment term for an IVA is 5years and at the end of he term the remaining debt is sometimes written off.

My IVA has been approved – now what?

Once your IVA is approved by your creditors you only have to ensure you make the agreed monthly payment. 

You make one payment (usually each month) to the IP, who will take care of paying your creditors. You no longer have to worry about the many bills arriving each month or juggling finances to pay off your debts. 

If you have any queries you deal with one company, the IP. Most government approved IPs will allocate you a specific debt manager, so you are always dealing with someone who knows your situation and who you are familiar with. 

In most cases your IP will ask for an annual financial review, as most people’s circumstances change from year to year. It is essential to be honest and show your commitment to clearing your debts. 

It is your responsibility to advise your IP of any changes in your financial circumstances, for example if you lose or change your job, your working hours change, your income drops or increases or you are finding it difficult to make the IVA payments.  

This is important because an IVA is a legal agreement and once it is approved you are committed to making your debt payments.

Are there fees for an IVA

Yes. The fee will be paid to your IP as part of your regular monthly payment. The IP must make it clear to you how much of your payment is taken as their fee and what the total fee is. 

IVA fees are not usually cheap. However, when considering an IVA and the fees you should take into account the long term financial benefits to clearing your debts. 

Government approved IPs should not ask for an up-front fee. If you are asked for money before your IVA has been approved walk away and find another IP.

The benefits of an IVA 

For people with substantial debts an IVA could be the solution to a debt-free future.

 

  • • An IVA is flexible and tailor made to your financial circumstances.
  • • No more pressure from your creditors – you will no longer have to communicate with them and they can no longer take action against you.
  • • An IVA is a legal agreement, showing you wish to pay your debts voluntarily, and a court cannot take action against you. So no more threatening court letters.
  • • Your home cannot be repossessed, although you may be asked to release any equity there may be in any property you own.
  • • You may be allowed to keep one vehicle (generally with a value of £5,000 or less).
  • • If you have any short term financial problems you may be granted a payment break for 3-6 months. Your IP will liaise with your creditors on your behalf.
  • • If you pay a substantial amount towards your debt it could be written off at the end of the payment term.

The negatives of an IVA

Of course there are some disadvantages, and it´s important you are aware of them before applying for an IVA.

  • You may have to sell some of your assets.
  • You will be listed on the Public Insolvency Register for the term the debt remains unpaid.
  • If you are paid a pension this is counted as income and will be taken into account when your monthly payments are calculated.
  • The IVA can be cancelled if you miss payments.
  • Your credit rating will be affected (although this will probably already have happened as a result of your debts).

if you would like to speak to a rrgulated debt advisor and get a free review

 

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If you would like to speak with a regulated Debt Management company about an IVA, complete the form above and we will get an expert debt advisor to contact you to review your situation and discuss your options.