Individual Voluntary Arrangement
How does Individual Voluntary Arrangement (IVA) work?
An IVA puts an end to worries about spiralling interest charges because when you enter an IVA all interest and charges on your debt are frozen so that the amount you owe does not increase.
This debt solution also enables you to avoid bankruptcy and gives you protection against creditors taking legal action against you while you sort your finances in a structured way. That means you no longer need to fear answering the phone or the door to creditors.
An IVA is designed to steadily reduce your debt so that by the end of the IVA period, which is normally five years but can be six, all debts covered by it have either been repaid or written off, leaving you free to make a fresh start.
Instead of juggling unaffordable debt payments to many creditors and having to scrape by every month just to survive, with an IVA you only have to make a single affordable payment and you will be afforded a reasonable sum each month for essential expenditure.
A licensed professional Insolvency Practitioner (IP) will work with you to draw up the terms of your IVA and will handle all direct contact with your creditors on your behalf. The IP will focus on securing agreement to the terms of the IVA from creditors accounting for 75% of your debt – once that is obtained you are afforded full legal protection from creditor action.
You make regular monthly payments at an agreed level to an Insolvency Practitioner (IP) who administers the IVA on your behalf and makes all the payments to your creditors. The IP will detail any fees or charges and explain how these work.
Bank and Building society loans and overdrafts
Home Shopping Catalogues
Council Tax Arrears
Mortgage debt is unlikely to be included – it is classed as secured debt as your home is held as a security against the debt you owe to your lender. Your IVA will take account of mortgage payments and other essential outgoings such as rent payments, factoring in how much you need to pay each month to safeguard your home.
If your home is worth significantly more than the amount you owe on the property, you may have to remortgage the house to release some of this value in order to repay your debts more quickly.
Individual circumstances vary and whether or not you may have to remortgage your property will depend on the value of your home, how much you owe on it and also whether your credit rating is sufficient to obtain a remortgage.