An IVA is a legal agreement between you and your creditors. You offer what you can afford towards your debts, for typically 60 months, in exchange for the remaining debt being written off.
An IVA may be suitable if…
- You have at least £5,000 of unsecured debts.
- You have 3 debts – but not all to the same creditor.
- You can’t pay your debts as your being asked.
- You have little prospect of repaying your debts in full within a reasonable time.
- Your financial circumstances are stable enough that you are able to commit to regular payments for 60 months of at least about £100. Actual payments depend on your ability to pay.
- You aren’t eligible for a DRO and it’s in your best interests to avoid bankruptcy.
- Available to homeowners
Homeowner’s do not qualify for a DRO and could lose their home in bankruptcy.
- You may continue to run your own business or be director of a private limited company.
In a DRO, you cannot be a company director.
- No risk of extended restrictions.
In a DRO, you may become subject to a Debt Relief Restriction Order if the Official Receiver considers you have been blameworthy and/or reckless in contributing to your insolvency – this can last for up to 15 years.
- No risk of solution being revoked.
If your circumstances improve during the term of the DRO, the solution could be revoked meaning you will need to put in place a different solution or repay the debt in full.
- You pay back more of your debt.
There are no ongoing payments with a DRO. With an IVA you agree to make payments for 60 months; plus in cases you may be required to introduce funds by way of remortgage.
- Debt free sooner
In a DRO you’re debt free in 12 months; an IVA normally 60 or in some cases 72 months.
- You could be made bankrupt.
If an IVA fails it could result in bankruptcy.
- Creditors may not approve your IVA
Whilst you have an opportunity yo make a proposal of repayment, meaning you have some control, this is subject to creditor approval.
How an IVA works
An IVA is formal debt solution and can only be setup under the supervision of a Licensed Insolvency Practitioner.
An Insolvency Practitioner is similar to a solicitor but specialises in matters concerning the legal processes surrounding debt.
You need to speak to an IVA provider such as ourselves to explain your financial situation.
If an IVA is suitable and should you wish to proceed, we’ll help you prepare your IVA proposal. The proposal is your offer to your creditors. It details your financial circumstances and how much you can realistically pay each month towards your debts.
The proposal is presented to all creditors – who vote on it. If 75% (by value of the total debt) who choose to vote (some don’t), do so in favour your IVA is accepted. All creditors, even those who have not voted or voted against must accept the IVA.
We Provide IVAs. An informal chat (about 20 minutes) with an advisor will make clear if an IVA is suitable for you.
Some debt could be written off
After the agreement completes, any remaining debt within the IVA is written off.
You only need to pay what you can afford once you’ve met your essential living costs.
Interest and charges stopped
While your IVA is in place, creditors can’t add further interest or charges to your debts. This alone can represent a saving of £1000s over the duration of the IVA.
While you are in an IVA creditors cannot take legal action against you to enforce payment for debts included in the IVA.
Important: Debt write-off depends on the circumstances of the individual applicant and applies only upon the successful completion of the IVA. Other benefits only apply while agreed payments into the IVA are maintained.
Unsecured debts only
Criminal Court fines, child support payments, student loans and certain other debts cannot be included in an IVA. It’s your responsibility to maintain these payments and other financial commitments.
During an IVA you can’t obtain further credit (some exceptions apply). A record of your IVA will be retained by credit reference agencies for six years.
Requires long term commitment
You can withdraw from an IVA application up to the point it is approved after which you are bound to formal insolvency proceedings.
A record of your IVA will be retained by credit reference agencies for six years.
IVAs and Home Ownership
If you’re a homeowner your home is protected, unlike in bankruptcy where it could be forcibly sold.
In return for this protection, if you have significant equity in your property, you are likely to be asked to make a contribution from that towards the end of the IVA by way of re-mortgage.
This is subject to affordability; so you’re never required to pay more than you can realistically afford. Being in an IVA may further impact your credit rating and you may be unable to get a re-mortgage. If you are unable to re-mortgage, the IVA may be extended by a further 12 months.