Individual Voluntary Arrangements (IVAs) are a personal debt solution that helps individuals become debt free. This solution works by consolidating all your outstanding debt into a single monthly payment. The amount of money you pay each month depends on your disposable income. If you are unable to make this amount, then you can apply for a payment holiday.
IVAs are only available for certain types of debt, such as credit cards, store cards, overdrafts and Council Tax arrears. If you qualify for an IVA, your creditors can be contacted and asked to join the arrangement. These creditors can’t take you to court.
Before you can apply for an IVA, you must have a long-term source of income. You must also have at least three creditors that are willing to agree to the IVA proposal. An insolvency practitioner will work with you to put together an IVA. Your IP will work with you to determine the amount of money you can afford to pay each month.
You must also make sure that you can meet the IVA repayment amount. For example, you may not have enough disposable income to afford a large lump sum. However, if you have improved your financial situation, you may be able to increase the monthly amount you are paying.
Aside from the lump sums you have paid into the IVA, you must be able to pay off the remaining debt. In the case of a home, you will be required to release the equity in the property in order to make the repayments. Alternatively, you can re-mortgage your home.
As with any personal debt solution, you should be aware of the effects that an IVA will have on your credit rating. It will remain on your credit file for at least six years, which could affect your ability to secure new credit.
Creditors may reject your IVA proposal or ask to modify it. They may also ask you to include assets in the IVA. Regardless of their decision, you are still legally bound by the terms of the proposal.
You can also apply for an IVA to get rid of any other debts you can’t afford. Some of these other debts might include a personal loan, overdraft, store cards and council tax arrears. Regardless of your circumstances, it’s important to speak with your IP about how much you can afford to pay each month.
If you are unsure whether an IVA is right for you, you can seek free advice from an IP. Many IPs will provide a free initial meeting. Also, check the Money Advice Service’s guide to debt solutions.
If you don’t qualify for an IVA, you should still consider re-mortgaging your home or taking out a secured loan. Depending on the size of your home, you may be able to avoid losing it.
You should also be aware that IVAs are not suitable for all people. If you have more assets than debts, you may need to look at other options.
Apply For an IVA to Get Rid of Unsecured Debt was first seen on Help with My Debt