If you find yourself struggling to keep on top of your daily finances then you may be advised to consider an Individual Voluntary Arrangement (often referred to as an ‘IVA’).
In this article we take a closer look at how IVA’s can be beneficial and what type of considerations need to be taken into account when it comes to finding the best way forward.
What is an IVA?
An IVA is a legally binding agreement which is made between you and your creditors. Instead of making separate arrangements to repay each debt you can simply make one affordable monthly repayment via your chosen advisor. Once received he or she will then distribute this to your creditors and continue to the manage the plan for its duration (which is usually 4 or 5 years).
How do I know whether it’s the best solution for me?
Once you’ve chosen an advisor you should ask as many questions as you feel necessary to ensure that an IVA is the best debt solution given your own personal circumstances.
IVA’s continue to help many people get their finances under control – however, they’re not suitable for everyone so it’s important that you discuss your financial situation with your advisor before you decide on whether to proceed or not.
How much will I have to repay?
How much you repay on a monthly basis will very much depend on a number of circumstances. If, for example, you have other debts which can’t be incorporated into the IVA then your advisor will need to ensure you have sufficient funds to repay these separately. Your creditors will also want a realistic proposal for repayment but of course, this also has to be balanced with your own affordability. Your advisor will be able to tell you more about this when you apply for an iva.
What happens if I can’t (or don’t) keep to the repayments?
If you fail to make your monthly repayments on time then this is likely to lead to very serious consequences and your IVA will fail. If this happens then your creditors will remain at liberty to pursue you for the outstanding amount and could even apply to make you bankrupt.
Will an IVA affect my credit score?
Yes. Details of your IVA will remain on your credit file for a period of 6 years from the date it commences. It’ll also remain on the Insolvency Register for a period of 3 months after the arrangement ends. During the term of the arrangement you may find it extremely difficult (if not impossible) to obtain credit and if you want to borrow a sum of money in excess of £500.00 then you must obtain written permission from your chosen advisor, unless the credit is needed for public utilities such as water, gas or electricity.
Consequently, if there’s a possibility you might need more credit in the shorter term than an IVA might not be the best solution for you. Your advisor will, however, be able to give you further information about other possible alternatives.