An IVA is an ‘Individual Voluntary Arrangement’ which basically freezes all your debts and allows you to repay them back over a set period of time (usually 4 or 5 years). However, instead of paying each creditor separately, an IVA enables you to make just one monthly repayment to your chosen insolvency practitioner so that he or she can then distribute this to all your creditors.
In order to enter into an IVA your proposal has to be accepted by the majority of creditors, so you’ll need to demonstrate that you have the means of repaying the arrangement for the entire duration of the arrangement. This is usually done by producing payslips and evidencing any income and outgoings.
Once you’ve entered into an IVA then you’ll make your monthly repayments for the set period of time and once the arrangement ends, any remaining debt under the IVA will simply be written off. This means that your creditors can’t contact you for repayment of any outstanding balance (nor can they contact you throughout the IVA period).
Unfortunately, whilst the vast majority of debts can be incorporated into an IVA there are certain exceptions to the rule including:
- Student loans
- Court fines
- Certain types of car finance
- Child maintenance arrears
- Council tax arrears
Consequently, if you have any of these debt types then your advisor will need to budget accordingly, so as to ensure you have enough money to repay both your IVA and any remaining debt. Your advisor won’t be able to manage these debts for you but will most likely be able to give you advice on how best to negotiate them with your creditors. Remember, most lenders would much rather receive something back than get nothing at all so it’s important to co-operate as much as possible to get the very best result from your arrangement.
To enter into an IVA then you’ll have to choose a licensed insolvency practitioner, who will add their fee to your outstanding debt. Their fee is usually deducted from your monthly repayments and the charge for this will depend between different providers so it’s important to shop around and ensure you get the best deal. Never be tempted to pay up front for your IVA – just in case your creditors don’t accept your proposal and the IVA fails. If this happens then you’d lose your fee and will still be left with your outstanding debts.
Remember, entering into an IVA is an important decision and one you shouldn’t take lightly. Once you’ve entered into it then you’ll be expected to maintain your monthly repayments and fully commit to it. If you have any reservations about being able to do this then you might want to look at other alternatives, such as bankruptcy. However, with the right advice and a bit of homework, there’s certainly no reason why you shouldn’t start to look forward to a debt-free future, minus all the stress of being contacted by your creditors.