IVA Explained
An Individual Voluntary Arrangement (IVA) is a legally binding contract between you and your creditors. It is arranged through an Insolvency Practitioner and in most cases means that you will be free from unsecured debt within five years (your credit rating may be affected for up to 6 years from the start of the IVA). You pay an agreed, affordable, monthly sum into your IVA, which is based on your income and expenditure. If you are a homeowner and there is equity in your home towards the end of the IVA, you may be required to seek a re-mortgage and pay these funds into the IVA or extend your IVA payments by up to a year.
Once the proposal has been accepted by the creditors, the funds paid in are distributed by your Insolvency Practitioner in accordance with the terms of your IVA. At the end of the Agreement, and following successful completion, any outstanding debt owed to the unsecured creditors will be cleared in accordance with the Agreement.
Once an individual enters into an IVA, all interest and charges are frozen, and so the cycle of debt is broken.
Criteria – Do You Qualify for an IVA?
- You must have unsecured debts of over £15,000, owed to at least three creditors
- You or your partner must have a regular source of income from employment
- If you are a homeowner, your mortgage payments will be taken into consideration as expenditure costs
- If your personal circumstances change during the Individual Voluntary Arrangement, the IP will act on your behalf and, if appropriate, submit a revised offer to your creditors for them to consider
If you do not qualify for an IVA then there are IVA alternatives which could still help.
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