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What is an IVA?
With an Individual Voluntary Arrangement (IVA) you can make affordable monthly payments towards a percentage of your debt for 5 years. At the end of the 5 year plan, your remaining debt will be completely written off.
Benefits of an IVA
Here is a list of the cost common advantages of an Individual Voluntary Arrangement (IVA):
- Affordability – You will only be asked to pay back what you can afford, with allowances taken into account for food, bills, entertainment, travel, childcare and others. You may be sacrificing certain essential costs at the moment. With an IVA they are budgeted for so they will no longer be neglected
- No upfront costs – When you set up an IVA, there are no upfront costs whatsoever. This means that you can put a debt solution in place today without spending a penny
- You have a finishing line – Do you feel like there will be no end to your debt problems? With high interest costs and charges, the balances of your credit accounts may not reduce as you need them to. With an IVA you will become totally debt free at the end of the IVA (usually 5 years). You can use this as an opportunity to change your financial life, for good
- Confidential – Your IVA is not advertised in the London Gazette or local newspaper. It is your decision whether you would like to disclose it to other people or not
- No more contact from creditors – When you are in an IVA, your creditors will no longer have the right to contact you or refer the debt on to debt collectors/bailiffs. This is a great benefit for most people as it will take away the stress caused by constant calls/texts/emails and home visits
- Stay in your house – Unlike some debt solutions, an IVA will allow you to stay in your current home. This is even the case if the property has a mortgage or is owned outright
- Your pension – An IVA does not have an impact on your pension. You will not have to surrender your pension or withdraw money from it to pay into your IVA
Risks of an IVA
Here is a list of the cost common disadvantages of an Individual Voluntary Arrangement (IVA):
- Equity Release – If you own your property and it has value, you may be asked to release the equity in the property
- Credit Rating – If you have a perfect credit rating, this will be damaged and you will not be allowed to take out more debt whilst in an arrangement
- You must keep up with repayments – If you do not keep up with your monthly repayments, there is a risk you will be made bankrupt
IVA Quick Guide
Check out our quick guide for useful tips before you apply for your IVA:
WHO QUALIFIES FOR AN IVA?
There is no office guidelines to who qualifies for an IVA, it is a Government legislation designed to help all people. Generally speaking, insolvency practitioners (IP) will look at your situation if they think the IVA proposal they submit is beneficial to both yourself and your creditors. This often restricts people to a certain criteria which you will have to meet:
- Over £5000 worth of unsecured debt
- You must have 2 or more creditors of 2 or more lines of credit
- Must live in England, Wales or Northern Ireland
- Must be insolvent
- Must be willing to pay at least £80 per month into their IVA
- Must have some type of regular income
WHAT DEBTS CAN I INCLUDE IN AN IVA?
You can include a wide range of unsecured debts within your IVA. These include:
- Credit cards
- Payday loans
- Council tax arrears
- HMRC debt
- Overpaid benefits
- Gas and electricity arrears
- Water arrears
- Income tax arrears
- Debts to friends and family
- Other unsecured debts
WHAT DEBTS CAN’T I INCLUDE IN AN IVA?
- Secured loans
- Your mortgage (if you still live in the house)
- Car finance (if you still have the car)
- Rent arrears for your current property
- Court fines
- Hire purchase arrears (if you still have the product)
- Log book loans (if you still have the vehicle that the debts are secured on)
- Other secured debts
WHAT DOES I.V.A STAND FOR?
IVA stands for Individual Voluntary Arrangement. It is a formal way to consolidate your debts into one affordable monthly repayment.
CAN I APPLY FOR AN IVA ONLINE?
- Use the IVA Calculator to check your eligibility
- Prepare your IVA proposal and apply for your IVA.
- When your IVA is accepted, your creditors can no longer contact you. Pay 60 low monthly payments.
- After 5 years, you are out of your IVA and completely debt free.
HOW WILL AN IVA AFFECT MY EMPLOYMENT?
In most occupations, your credit rating or credit scoring is not a factor and it may never have been checked in the past, it may also be likely that it is not checked in the future either.
There is no law to tell you that you must advise your employer that you have entered an IVA. They will not be notified by your insolvency practitioner. If you wanted to keep it a private matter, in most cases this would be absolutely fine.
With some occupations such as financial advisors, solicitors or bank workers it may make up part of your contract to advise them of changes like this. In these situations we would advise to inform your employers of your intentions before you enter into any arrangements. This way there will be no nasty surprises for you later down the line. More often than not, we find that your employer would not be concerned by your IVA.
HOW WILL AN IVA IMPACT MY PARTNER?
There are certain situations where you may not want to involve your partner at all in your IVA proposal due to personal reasons. Insolvency Practitioners are very aware of these circumstances and can operate solely via telephone and email and at your convenience, so rest assured that your matters can be kept completely private.
If the debts which you are looking to place into your IVA are in joint names, then this would be different. Your IP would look to place all of your debts into an IVA, including joint debts therefore you would have to inform your partner of your plans.
If your debts are solely yours, then there would be no negative impact on your partner, their credit score would remain unaffected and they would not be entered onto any registers or be tainted in any way.
WILL AN IVA AFFECT MY CREDIT SCORE/CREDIT FILE?
Whilst you are in your arrangement, you will not be able to get any credit. An IVA will stay on your credit file for 6 years, so 12 months after a typical IVA. When this time has passed you will be able to rebuild your credit rating.
WHAT PROOF WILL I NEED TO APPLY FOR AN IVA?
- Proof of ID – Passport/driving license/birth certificate/utility bills
- Bank statements – 3 months bank statements with all transactions displayed
- Proof of income – 3 months payslips/P60/proof of benefits
HOW LONG DOES IT TAKE TO SET UP AN IVA?
Your initial call will only last around 5-10 minutes. The IVA process will be explained to you and you will be told what further information you will need to provide to proceed with your IVA proposal. Once you have returned the required information, an IVA will usually take between 7-14 days to get into place. You will be protected from creditors within this time, your advisor will provide you with documentation via email.