What are the Pro’s and Con’s of an IVA?
When you owe money, beginning to deal with your debt is the first difficult but important step towards living a debt-free life. Exploring debt management solutions for your circumstances can also be difficult, making sure you have all the information you need will help you to make the correct decision.
In this article, we’ll look at one of the options available to you – an individual voluntary arrangement (IVA). We’ll take you through what it is and the pros and cons of getting an IVA.
At IVA Helpline, we’re dedicated to giving you the best debt advice for your individual circumstances, ensuring you find the best debt solution for you.
What Is An IVA?
An individual voluntary agreement is a legally binding agreement between you and your creditors that sets out a repayment plan, usually over the course of 5 years. It is available in England, Wales, and Northern Ireland.
An IVA will freeze all interest and charges on your unsecured debt, allowing you the time to pay off what is owed without harassment from creditors or the ability for them to initiate court proceedings against you.
At the end of your IVA, unsecured debts left over will be written off, and you will be able to move on with your life. Creditors will have to agree to the terms set out, and any contact will have to be made to your debt management company or insolvency practitioner (IP).Check if you qualify
Is An IVA The Right Choice For Me?
In order to be eligible for an IVA, there are certain criteria that you must meet;
If you are eligible and want to find out more, get in touch on 0800 464 7235, and our experts will be able to answer any questions you may have. We’re here to offer IVA advice and help you decide whether this is the right debt solution for you.
Call us on 0800 464 7235
Our trained advisors are here to help, so if you think an IVA proposal is one of the best debt solutions for you, don’t hesitate to call us on 0800 464 7235 to speak to one of our trained debt advisors or click below to see if you qualify…Check if you qualify
Types Of IVA
While an IVA will work in the same way for self-employed and employed people, in that your insolvency practitioner will create a schedule of affordable payments that are to be made monthly, there are some differences that include;
Joint IVAs allow couples to set up an individual voluntary arrangement that covers joint debts and, once accepted by creditors, results in one affordable monthly payment for the household.
Full And Final IVAs
If you have savings, are selling an asset that will release funds, or have a benefactor willing to provide you with the amount needed, it is possible to arrange a one-off, final payment to settle your debts with creditors.
IVA Pros And Cons
To help you make the right decision, here are some of the most important IVA pros and cons;
ConsCheck if you qualify
Life With An IVA
Living with an IVA is a big commitment, and adjustments to your lifestyle will have to take place. Your budget will not stretch far beyond living expenses as your IP will look at all of your incomings and outgoings to determine what you can afford to pay back.
In terms of employment, it should not have an impact on most jobs, although some professions require that you disclose if you enter into an IVA. Jobs such as working in a financially responsible position like solicitors or accountants may have to disclose this as well – including the fire service, prison service, police, and banks.
Self-employed people will be able to continue as normal, although it may affect relationships with some suppliers.
If you own your home, you will be required to disclose the amount of equity available should you sell your home and pay off your mortgage. It is important to say that you will never be required to sell your home as part of an IVA.
Because this impacts your credit rating, borrowing can be difficult even after you become debt-free. The IVA will stay on your credit file for 6 years, meaning your credit score will be affected for the duration of this timescale.
If the possibility is there to release equity, your creditors or IP may raise this subject for you to consider.
We have looked at how an IVA will impact your life as well as IVA pros and cons, but we understand that everyone’s circumstances are different. It is important that you look at all the available debt solutions available to you before deciding.
Speaking with our team at the IVA Helpline on 0800 464 7235 is a great place to start – you’ll be able to ask any questions you might have or seek advice on other debt solutions.
Tackling your debt can be daunting – reading through all the information to find the best solution for you can seem like an insurmountable task, which is why we’re on hand to answer any questions or to guide you on your way to repaying any debt you may have.
Knowing how an IVA will impact your finances and credit rating will help you come to the right decision. We are here to help with any information you need to help with your financial circumstances.Check if you qualify
Frequently asked questions
Can I cancel an IVA?
It is possible to cancel an IVA; however, it is recommended that you speak to your insolvency practitioner about the circumstances surrounding the request to ensure this is the best option for you. Weighing up the IVA pros and cons we have previously outlined should help you with your initial decision.
If an IVA is cancelled, you will still have to repay the remaining amount of debt owed to your creditors, and you will have to organise repayment with them. It will still show on your credit rating as well.
Payment will also be required for the service carried out by the IVA provider up to the point of cancellation.
A request to cancel must be submitted in writing to your IP. Before the IVA is failed, you will receive a notice of termination.
How much does an IVA cost?
There are costs involved in an IVA beyond the repayment of debt. Fees that you can expect to pay if you are setting up an IVA include;
Disbursements – This fee covers costs paid to third parties that might cover insurances and software licenses.
Nominees fees – This will cover admin and facilitation costs and the preparation of the IVA proposal.
Supervisor fee – This will either be a percentage of the payments made or a flat fee agreed upon before the IVA taking effect. This fee goes towards collecting and distributing owed money, query handling, reviews, dealing with creditors, and ongoing administration associated with your IVA.
Who will manage my IVA?
Your IP will arrange your IVA with your creditors as well as work out your affordable monthly payments. They will also be the point of contact for creditors and share out your payments among them.
You will also be responsible for managing certain factors of your IVA, including updating your IP of any change of circumstance.
As well as this, you will be expected to make your payments accurately and on time, as falling behind with your payments can result in your IVA failing and being terminated.
You will have to submit all necessary documentation for your annual IVA review. This can impact whether your IVA payments go up or down.
Do creditors have a right to claim my possessions?
Creditors do not have a right to claim your possessions. Any assets of value will be detailed in the proposal, and you will discuss with your IP what to include in this.
If you choose to exclude certain items, creditors may ask you to sell these to make repayment. Your consent is required, and you will not be forced to do this; however, it may have an impact on whether creditors agree to the terms. All domestic and household goods are excluded from the arrangement by law.
Items that you will never be asked to sell as they are deemed essential are;
Electronics such as phones, computers and TVs
Medical aids such as wheelchairs or mobility scooters
It is important that you disclose any shares, insurance policies, endowments, ISAs or investments you may own to your IP so they can accurately decide on what monthly payments you will be able to afford.
What debts can be included in an IVA?
The majority of unsecured debts can be included in an IVA. These are debts not tied to an asset such as your house. Debts that can be included in an IVA include;
Store card debts
Energy and water bill arrears
Income tax arrears
National insurance arrears
Council tax arrears
Tax credit overpayments
Personal debts to family or friends
Your IP will be able to go through any outstanding debt you may have and advise of the suitability of adding them into an IVA.
What debts can’t be included in an IVA?
Secured debts are not permitted to be included in an IVA. Secured debts are when the borrower has used an asset as collateral to assure the lender that if they are not able to pay, they will have a fallback.
This type of debt that will not be included in an IVA includes;
Debts incurred through fraudulent activity
Child support arrears
TV licence arrears
Social fund loans
If you are unsure about any debt that you may have, speaking with our experts on 0800 123 4567 will help you determine whether you will be eligible to apply for an IVA on your debt.