An individual voluntary arrangement (IVA) is a formal and legally binding agreement between you and your creditors to pay back all or part of your debts over a period of time at an affordable rate.
Once you enter an IVA, creditors can take no further action against you and won’t be able to contact you directly. An IVA will affect your credit rating for six years and your information will also be placed on the public Register of Insolvencies for the duration of the plan but will allow you to clear your debts.
In an IVA, a single monthly payment is agreed upon with your current financial situation taken into consideration – this payment is then divided among the people you owe money to.
During the course of your plan, all interest and fees associated with your debts are frozen. At the end of the IVA, the remaining debts are written off and you can begin your debt-free future.
Advantage Of A IVA
- your IP can help you work out how much you can afford to repay
- your IP will contact all your creditors and get them to agree to your IVA for you
- your creditors can’t take any action against you – for example, taking you to court or making you bankrupt
- interest and charges are usually stopped
Disadvantages Of A IVA
- Your credit rating will be adversely affected throughout your IVA and usually, for an additional year after completion.
- Should the IVA fail, creditors may back date interest on your debts or may request your Supervisor petitions for your bankruptcy.
- Not all debts can be included in an IVA, such as court-imposed penalties/fines.
- If you come into any extra money whilst in your IVA, this will be taken into account and you could be expected to pay any windfall into your IVA as well.
- You may have to downgrade or sell any really high value assets (such as exchanging a luxury car for a more economical one).