How an IVA helps you
- Up to 80% of your debt written off
- Lower monthly repayments that suit your budget
- No more interest or charges to stop debt growth
An Individual Voluntary Arrangement (IVA) is an agreement between you and your creditors. IVAs were designed by the government to help you regain control of your money. IVAs are set up and then supervised by insolvency practitioners, specially licensed professionals who manage the IVA to ensure
When you call us, we’ll ask you a few questions about your finances, to work out what you can afford to pay. Then, you agree to make regular, realistic, monthly payments – usually just for 60 months (5 years). These are divided between your creditors. If you keep up with your new, lower repayments, you’ll be debt-free in 5 years – once all the agreed payments have been made.
How it works
IVAs are designed to help you escape the endless charges and interest rates of debt. Without this help, you might stay in debt for many years.
Also, an IVA is a legal agreement – that means that your creditors must stick to the terms agreed.
After we have worked out what you can afford to pay, the insolvency practitioner will assist you in drafting a document called an ‘IVA proposal’ which explains what you can afford to pay.
This offer is then voted on by your creditors and once accepted becomes a legally binding agreement which prevents the creditors from taking any further action against you to recover their debt.
Here’s a list of the main benefits:
Only one payment per month
You make just one repayment each month – this is then distributed to your creditors on your behalf, after the IVA supervisor’s fees are deducted.
Reduced monthly repayment
You only pay what you can afford. This is based on your income and your outgoings.
Interest and charges frozen
Your debt won’t get any bigger. Your creditors agree that there’ll be no more interest and no more charges.
Protection from creditors
Your creditors aren’t allowed to contact you to ask for payment – no more stressful letters, calls or knocks on the door.
Debt-free in 60 months
Although an IVA can be longer, you will most likely be free of debt in five years, as long as you keep up your repayments.
Excess debt written off
After your 60 monthly repayments, you won’t have to pay any more of the debt that’s left over. This can be up to 80% of your debt.
For example, if you have debt of £21,000 but can only afford monthly payments of £100, it is possible that over 70% of the debt will be written off. After 60 contributions of £100 per month, you will have paid only £6,000 compared to the debt of £21,000 which you had to start with. This leaves £15,000 of the debt unpaid, which is then written off. This is 71% of the debt you had.
Fee-free to consumer
IVAs are set up and managed for you by a specialist licenced practitioner. Although there are fees for this, these are deducted from the monthly payments you make so the fees are all paid by your lenders, not you.
In the example above, the fees charged by the insolvency practitioner will be deducted from the £6,000 paid into the IVA, so the creditors will actually receive less than that. So, as well as freezing interest and charges completely, they will need to write off even more than 71% of their debt even though that is the amount by which you have reduced your debt repayments.
Things to be aware of
There are a few things to bear in mind with an IVA. Have a look at the list below to understand some potential downsides. That said, if you’re struggling with debt, the benefits of an IVA far outweigh any of these.
Your IVA needs to be agreed by your creditors. They’ll have certain criteria you need to meet before they agree to your IVA. Usually, we can tell you quickly if they are likely to agree an IVA or not before you proceed, so you’re not left worrying about it.
Your credit rating
Entering an IVA has a negative impact on your credit rating, which remains on your credit file for six years in the normal way. However, this is true of all of the options available to deal with a serious debt problem. The good news is that when you successfully complete your IVA this shows you have done your best to resolve your debts, which may improve your rating. Also, you’ll also normally be asked to stick to a credit limit of £500 while the IVA is active. This is because an IVA is designed to help you stay debt-free.
Your other debts
An IVA is designed to deal with your unsecured debts, but certain types of debt cannot be included. These include student loans, fines that’ve been issued by a court, child maintenance and overpayments of benefits or tax credits arising from fraudulent claims. For secured debts (such as your mortgage or hire purchase agreement) any shortfall incurred if the security is sold could be included in the IVA.
But don’t worry – your IVA will be designed to help you manage any of these debts if you have them. We’ll make sure you know which debts are included, as well as those that aren’t, before you decide to take an IVA.
It’s really important that you keep up with your monthly payments. Failure to do so could result in the termination of your IVA so its important to tell the Insolvency Practitioner if you get into any difficulty with your payments. Remember, your monthly repayments are based on your household budget and should be considerably lower than your current debt repayments.
Your public information
Once your IVA is accepted, your details are entered onto a public register, called the Individual Insolvency Register.
Contact us to find out more about the IVA and start your application today!