IVAs: Frequently Asked Questions
March 15th, 2010What is an IVA?
An IVA means an Individual Voluntary Arrangement. It is made between you and your lenders. It is similar to bankruptcy in that it is a type of insolvency that writes off a proportion of your debts if you are unable to repay them within what is judged to be a reasonable time. Where it differs from bankruptcy is that it allows you to keep your home and will not be published in the press. It will however severely affect your credit rating.
How does an IVA work?
The organisation managing your IVA will negotiate with your creditors and attempt to persuade them that an IVA is the best solution to handle the current problems. By agreeing to write of a proportion of your debt, they will know that at least the agreed proportion of the debt will be repaid over a five year period, which will be better than alternative outcomes such as forcing you to go bankrupt.
Who do I pay?
You pay to the IVA in a single monthly payment. This money is then distributed to your lenders.
What are the main advantages of an IVA?
Your monthly payments are reduced to an affordable level. Debts you can afford to repay are written off. Your creditors can take no further action against you. At the end of five years you will be out of debt.
Is an IVA my best solution?
An IVA might be the best solution if your total unsecured debts are at least £15,000 and you cannot afford to repay them, but you can afford to make smaller regular payments for a period of five years. There are disadvantaged too, so you should seek personal advice on this.
How much would I have to pay?
Every IVA is different. It is necessary to calculate how much you can afford to pay per month and what your lenders are willing to accept. Your payments would include any fees.
What if all my lenders don’t agree?
An IVA can only go through if lenders holding at least 75% of your debts agree to it.
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