You may have heard the term ‘IVA’ used when people and companies talk about debt – but what is it? How would you go about getting one? And would it be the right solution for you?
What is it exactly?
IVA stands for ‘Individual Voluntary Agreement’ – it’s a legally binding agreement put into place by between an individual and companies they owe money to.
What does it do?
Essentially an IVA (Individual Voluntary Agreement) takes into consideration all the unsecured debt that a person owes and packages it together into one large sum. The person is supported to calculate exactly how much they can afford to pay toward that sum each month and an agreement is put into place to ensure this payment is made. Payments will normally be made for 5 years and when the final payment is made, any outstanding money is written off and you are debt free.
Who can get one?
If you think an IVA might be the right solution the first step is to talk to a professional company experienced in supporting people through the process. You will work with that company to assess your current financial situation and an affordable monthly repayment amount will be decided upon. When that’s been done, your creditors will be contacted and this monthly amount will be proposed – they can either be in favour of the agreement or against it.
What happens if they say no?
Often it doesn’t matter, the company or companies to which you owe the largest proportion of the money get the final say, so if most agree, the others are bound by the agreement anyway. Creditors often welcome an IVA, for them it means a repayment of at least some of the debt, which is often preferable to chasing an individual over a large period of time with no certainty that they will be able to recover their money.
So I just pay a set amount?
To begin with an amount is agreed upon based on your current financial position – but this can change. Part of the reason creditors agree to an IVA relates to the fact it’s based on affordability, so if you can afford a little more, the payment might increase – although it’s not just creditors that are protected, if your financial circumstances change and you can no longer afford the payment then it can be reduced.
Who puts an IVA in place?
An Insolvency Practitioner (often referred to as an IP) assesses your finances and draws up the legal agreement between yourself and the companies you owe money to. As professionals, IPs are trusted to do this fairly and impartially. When in place they oversee the agreement, making sure an affordable amount of money is being repaid and ensuring that creditors stick to the terms – which includes not adding any additional charges or interest.
Why do people choose an IVA?
No more calls: The IP deals with the creditors so you don’t have to.
Your house is safe: Court action is stopped, if you’re a homeowner this means your house is no longer at risk.
No more charges: When an amount is agreed by a creditor that’s it, they cannot add further charges or interest.
Agreed amount: You make the payment you can afford, not more.
Agreed timescales: Your agreement runs for the time agreed (normally 5 years) – after that your debt is gone.
Continuing to struggle with out-of-control debts might feel like it’s the only option or the right thing to do – but it could be leading you toward a far worse situation; including bankruptcy or repossession of your home. If you think an IVA could be the right path for you speaking to a professional could lift an enormous weight from your shoulders and protect.