If you’re struggling with debts and live in either England, Wales or Northern Ireland then one of the options you might want to consider is an Individual Voluntary Arrangement (more commonly referred to as an ‘IVA’)
What is an IVA?
An IVA is a formal and legally binding agreement which is made between yourself and your creditors to repay your debts through a properly managed arrangement.
In essence, an IVA isn’t dissimilar to a consolidation loan since it enables you to repay all your outstanding debts through one affordable monthly repayment.
That said, it’s important to recognise that not all debt types can be incorporated into an IVA so it’s important to take independent financial advice before deciding whether it’s the best option taking your individual circumstances into account.
How do I enter into an IVA?
An IVA can only be set up and managed by a suitably qualified person i.e. an insolvency practitioner (who might typically be an accountant or lawyer).
Once you’ve entered into an IVA then this person will continue to manage the arrangement on your behalf until such time as the arrangement has been satisfied in full.
Throughout the duration of the arrangement, your chosen advisor will distribute your monthly repayment to your creditors and will keep it under careful review.
Is it true that some of my debts can be written off through an IVA?
In certain cases, yes. If the repayments aren’t enough to repay your outstanding debts in full then the remaining balance will usually be written off.
Most creditors tend to agree that to have at least of the debt paid off is better than having none of it paid off – hence their agreement for you to enter into an IVA and have the repayments managed by a third party i.e. your chosen insolvency practitioner.
What type of debts can’t be incorporated into an IVA?
Whilst the vast majority of debt types can be incorporated into an IVA there are certain exceptions, for example:
- Maintenance arrears and/or child support arrears
- Student loans
- Court fines
If you have any of these debt types then you’ll need to come to a separate arrangement to repay them.
Although these can’t be incorporated into the IVA it’s important you discuss these with your chosen practitioner since he or she will need to ensure that you can afford to repay both your IVA and any other debts which can’t be included.
After all, the whole point of an IVA is to help you regain financial control of your income and outgoings so this is certainly something you should discuss before entering into an arrangement.
Once made, an IVA is legally binding and you’ll be bound by the terms agreed under it.
Where can I get advice about an IVA?
There are lots of IVA companies you can get advice from including The Citizens Advice Bureau and debt charities (many of whom you’ll be able to find online).
Most insolvency practitioners also offer a free consultation so it’s advisable to do your homework and ensure you get the person to advise you from the outset.