The IVA (individual voluntary agreement) is a debt solution that can be used to help you deal with unmanageable debt. It helps you to keep your assets and protect them from your creditors, while lowering your repayments. An IVA is a legal contract between you and your creditors, who will agree to a repayment plan that is designed to make repaying your debts more affordable.
The IVA is an alternative to filing for bankruptcy. It can be a good idea to consider this option if you’re struggling with your finances, but you should first check out other options. While an IVA will lower your payments, it will also leave a bad mark on your credit record. Your lender will also be able to view your IVA on your credit report. If you fail to pay your IVA payments, your IP can take legal action against you. Having an IVA may also lead to your losing your home.
Aside from the benefits of an IVA, it’s important to remember that the process isn’t always easy. For example, you may be required to release equity from your home, or trade in a car that you’re still paying off. You could even be asked to remortgage your house within two years of entering an IVA.
In addition, you’ll need to have an extra budget in place for your repayments. Your disposable income, based on your household’s incoming and outgoing expenses, is used to calculate how much money you have left over to repay your debts. Some IVAs will keep this amount and write off the rest at the end of the term.
One of the biggest advantages of an IVA is that it freezes the interest rates you pay on your debts. This means that you won’t be able to borrow more. However, your rate may increase if you’re unable to pay it off.
To be able to file for an IVA, you need to have an active job. Generally, your credit score will go down, so it’s wise to seek out free advice before entering one. Although an IVA is an effective way to solve your debt problems, it can be a hassle to handle. Also, you’ll have to disclose any changes in your circumstances to your IP.
You’ll need to have enough saved up to cover your IVA. An IVA may be worth considering if you have large amounts of unsecured debt, or multiple debts. Many people find that having an IVA is beneficial because it provides a financial buffer that will reduce the number of monthly payments they have to make on their unsecured bills.
Another good reason to consider an IVA is to protect your home from your creditors. If you’re having trouble making your mortgage payment, your IP will probably ask you to release some of the equity from your home. As with any financial plan, you need to be prepared for the possibility of having your home repossessed. But it’s possible to avoid this situation.