If you are struggling with debt, you may want to consider an Individual Voluntary Arrangement (IVA). An IVA is a formal arrangement with your creditors, whereby you agree to pay a reduced amount to each creditor. This helps you to make affordable repayments over a period of five or six years.
You will also have to sign a contract with an insolvency practitioner, who will look after your debt. The provider will work with you to identify essential expenses, assess your income and expenditure, and enter into a legally binding agreement with your creditors. A supervisor’s fee will be charged to cover the costs of administering the IVA. It is usually a flat fee, but can be based on a percentage of the payments made.
Your IP will work with you to develop a budget for the IVA, and then to ensure that you can make the monthly payments. They will also look at your income and expenditure every year to make sure you are not overextending yourself. They will then use your disposable income to calculate the payment amount. This is the sum of your remaining income after essential spending, such as groceries, rent or mortgage, and bills.
An IVA is often an effective means of clearing debt. However, it is important to remember that your debt will be listed on your credit report for the duration of the IVA, and it will affect your ability to obtain credit in the future.
If you decide to remortgage your home, the IP will take into account any equity that you have. This equity will be considered when calculating your total amount of debt, and may mean that you are asked to pay back more than you originally intended. To reduce your debt, you may be asked to sell some valuable items.
Some people will be asked to give up their home to reduce their debt. In most cases, this will only happen if the equity is over PS5,000. Even then, it should not be necessary to sell your home. Rather, you will have to make IVA payments for a year before you can release any of the equity.
Once your IP has reviewed your circumstances and prepared a proposal, your creditors must approve it. This is done by a vote of at least seventy-five percent of the creditors. When the IVA is approved, it will be listed on your credit file for six years. There is also a public record of your IVA, which will flag up to lenders that you have had trouble making your payments in the past.
As part of your IVA, you will be required to make contributions to the IVA fund, which will be paid to your creditors. These contributions can include savings or disbursements, such as insurances or third party costs.
An IP will also be responsible for monitoring your spending and for contacting you if there are problems. They will also make provisions for repairs to your home and for emergency expenditures.
What You Need to Know About an Individual Voluntary Arrangement (IVA) was first seen on Help with My Debt