IVA Questions - The Facts Explained In Simple Terms

An IVA or individual voluntary arrangement is just one of the many ways that you could look into becoming debt free. It provides similar benefits to bankruptcy but is less restrictive but it does come with cost and it certainly does have to be given a great deal of thought as there could be other solutions better suited to your needs. Depending on the amount and type of debts you have you might also want to give some thought to a consolidation loan or a debt management plan.

Many individuals in debt believe that an IVA is a simple way of breaking free of debt as once the agreement has been reached any remaining outstanding debt is written off. There are many advertisements on TV that make an IVA seem like a miracle cure and easy way to get out of debt, when this is actually not so. Advertisements that proclaim “We can clear your outstanding debts” and “have up to 75% your debts written off” make taking an IVA seen like a cure all for any one in debt. While an individual voluntary arrangement can work for many it certainly is not the easy solution that is often portrayed by some companies who charge astronomical fees to set up your IVA and act as insolvency practitioner. Therefore you need to understand how they work and what is involved.

The arrangement is made by yourself and those you owe money to with the aid and supervision of an insolvency practitioner. You would have to pay to have an IVA set up and this can be a considerable amount of money in excess of £2,500 when all the fees and administration charges have been taken onto account. This however can vary with the company you decide to go with for your IVA.

The arrangement is a legally binding contract so once you enter into it you would have to stick to the agreement, so it should not be undertaken lightly. The company should be able to answer any IVA questions you have and help you to decide if this was the best solution for your needs.

An insolvency practitioner would work with you and draw up a financial statement so that they know what is coming into the home each month and what is going out. This would help to decide how much you would be able to pay your creditors each month. The practitioner would then approach your creditors on your behalf and as long as a minimum of 75% of them agree to the reduced payments the IVA could go ahead.

The individual voluntary arrangement is usually taken over 5 years in which time you continue to pay the agreed sum of money each month and at the end of the term the outstanding debt is written off. This would usually be in the region of 50% to 60% realistically but can be as much as 75% in some cases. The IVA was introduced by the Government in 1986 to allow creditors to get back more money owed to them than they would under bankruptcy laws.

Before rushing into taking out any form of debt solution ensure that you are aware of all your options and have discussed these with a financial advisor.

There is certain criterion that has to be met in order for you to qualify for an IVA which of course means that it is not suitable for all individuals in any type of debt. You would therefore have to check suitability for your circumstances when even considering an individual voluntary arrangement.

Here are the basic requirements:

• You would need to be in employment or be self-employed
• You must owe money to at least 3 separate creditors
  
• You must have debts totalling over £15,000
  
• Your debts must be unsecured
  
• You must be able to afford to repay between 30% and 50% of your debts back over a period of 60 months