When your debt becomes unmanageable and spirals out of control, the situation can be very worrying. However, there are several debt solutions designed to help people with serious unsecured debt problems. One such debt solution is an Individual Voluntary Arrangement (IVA).
An IVA is a legally binding debt solution, and is complex to set up, so you’ll need to speak to an Insolvency Practitioner (IP) if you are considering entering into one.
What does an IVA do?
An IVA is a formal agreement between you and your unsecured lenders that enables you to repay as much of your unsecured debt as you can realistically afford over a set timeframe (usually five years), after which your creditors will write off any outstanding debt (assuming you’ve fulfilled your side of the agreement).
If you decide an IVA is right for you – and your IP agrees – you’ll need to get your ‘IVA proposal’ approved by enough of your lenders. If that happens, you will begin making regular payments to your IP, who will subsequently distribute the agreed amounts to each of your lenders (on a pro rata basis).
The payments you make will be based on the amount you can realistically afford once your essential monthly commitments have been covered. Upon successful completion of your IVA, you will be legally debt free (as far as your unsecured debts are concerned).
IVAs – important points to consider
• If you are a homeowner, you may be required to release some of the equity in your home during the 54th month of the agreement – to pay off more of your debt.
• If you enter an IVA, your credit rating will be affected for six years from the time it begins – affecting the cost and/or availability of credit for this time.
• If you can’t commit to making regular payments, an IVA would not be appropriate for you.
So, can I arrange an IVAon my own?
An IVA is a legal process, and you can’t arrange one on your own. It has to be arranged by an Insolvency Practitioner, who will work with you to put together the initial IVA proposal, and will oversee the IVA all the way through, working to bring it to a successful conclusion.
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