Basically, an IVA is a legal agreement between a debtor and his or her creditors. It allows the debtor to regain control of his or her assets and make affordable repayments. An IVA is available to people who are insolvent in the UK, Scotland, Northern Ireland and Wales.
To be approved, an IVA will need the support of at least 75 percent of the creditors involved. Some creditors will vote against the proposal while others may choose to take legal action to recover unpaid funds. In any case, if the proposal is accepted by creditors, the IVA is legally binding. An IVA will stay on your credit report for six years.
To start an IVA, you will need to contact an Insolvency Practitioner. The IP will advise you on how to go about banking with an IVA. Some IPs may require you to pay a fee up front before putting forward an IVA proposal. This may be a big concern if you are struggling to make ends meet. You may also find it difficult to find a reputable lender. If you find a new lender, you should check their rates of interest.
You may also be asked to remortgage your home. If your home is worth more than your mortgage, you may be asked to contribute to an IVA. If you do, your home will not be automatically sold. You may also be asked to release equity from your home. This is done by subtracting your mortgage from your home’s value. This will determine how much money is available for you to pay your creditors.
An IVA will also write off your debts if they are insolvent. It is estimated that a considerable amount of unsecured debt can be written off with an IVA. However, it is important to note that the actual amount written off will depend on your specific circumstances. The IVA will also help you to improve your credit rating.
Another benefit of an IVA is that it can reduce the amount of money you are paying on unsecured debt each month. If you are unable to make repayments on your credit cards, loans, or bills, you may be at risk of losing your home. However, a good IVA will ensure that you only pay what you can afford. You will also be able to continue to build your private pension.
If you are unable to pay the monthly payments, your creditors may start legal proceedings to recover unpaid funds. If you miss three consecutive payments, your IVA may be terminated. The supervisor will also have to issue a breach notice to you.
You should also check the terms of your bank account. Some banks may not allow you to use your account while you are in an IVA. This may result in your bank attempting to recover money from your account. If you are in financial trouble, you may not be able to pay the fees associated with the Nominee. Depending on your bank’s terms, you may not be able to get a credit card or an overdraft.