An individual voluntary arrangement is a formal agreement between you and your creditors. It helps you repay your debts at a rate that you can afford. You can make a one-off payment on your debts, known as a lump-sum IVA or 60 or 72 monthly payments, over a period of five or six years. Once your IVA is approved your creditors shouldn’t contact you and demand money beyond what you’re paying into your IVA.
Once you make your final payment you’ll no longer be liable for all of the debts included in your IVA and there’ll be no further balance to pay. While IVAs are a form of insolvency there’ll be no need to sell your home if you don’t want to. Your IVA will be logged on your credit file from the day that it’s approved. It can stay on there for six years or longer. This may make it difficult to obtain credit once the IVA is finished. You won’t be able to take out over £500 worth of credit during your IVA. You’ll also need to get approval from your Supervisor; otherwise, your IVA may be terminated.
You may need to release equity in your home to pay into the IVA. If you’re unable to remortgage, you can add 12 more payments, to the original 60 payments of the IVA. Alternatively, someone else could offer a lump sum equivalent to the equity. Remortgaging may result in a higher interest rate. Your IVA will be added to a public register. it’s unlikely anyone you know would see this register, but it’s something to be aware of. IVAs have to arrange through Insolvency Practitioner (IP). You must stick to the budget they work out for you and you must let them know if something changes.
To be eligible for an IVA, you need to show that you don’t have enough money to pay your debts off in a reasonable amount of time. In most cases, your debts must be more your assets including any property you own. You also need to have some surplus income each month after paying for all of your living costs. With any debt solution, it’s important to get debt advice to make sure that it’s suitable for your situation.