What is an IVA?
An individual voluntary arrangement (IVA) is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. This means it’s approved by the court and your creditors have to stick to it.
Advantages of an IVA:
- Stops interest on your debts.
- Creditors can’t hassle you for payment.
Disadvantages of an IVA:
- Involves considerable setup fees.
- May not be optimal for debts under £10,000.
- Windfalls, like inheritances, might be utilized to settle debts.
- Creditors can claim pre-IVA owed funds even after its conclusion.
Your responsibilities in an IVA:
While in an IVA, you must:
- Make agreed payments, usually monthly or a lump sum.
- Inform your IVA provider if your income increases or you receive extra money.
- Don’t take new loans or credit without permission.
Debt amount in an IVA:
You can include any amount of debt in an IVA, with no minimum or maximum limits. But be aware, IVA fees are high, so it might not be the best choice if your total debt is under £10,000.
Your repayment plan should be affordable, and creditors must agree to it. If making monthly payments, the IVA typically lasts 5-6 years.
IVAs must be established by qualified professionals known as insolvency practitioners, who charge fees for their services.
When considering debt management, be cautious of debt management companies, which may charge additional fees on top of those from insolvency practitioners. You can acquire an IVA without their involvement, often at a lower cost, by finding an insolvency practitioner yourself.
To initiate an IVA independently, visit GOV.UK to locate an insolvency practitioner.
Repayment procedures in an IVA involve working with the insolvency practitioner to create a plan, which can include monthly payments, lump sums, or a combination. The plan should align with your financial capacity and must be approved by your creditors. Typically, IVAs with monthly payments run for 5 to 6 years.
You can read the full article on the Citizens Advice website.