IVAs or Individual Voluntary Arrangements can act as a really effective tool for people whose finances have become unmanageable. However, it’s worth making sure you understand the details of any such arrangement before taking any decisions.
Your Insolvency Practitioner will be able to help you get to grips with what’s involved in an IVA and make sure it’s a good option for you, but there are a few general points to bear in mind.
Terms of an IVA
You will need to be able to keep to the agreed payments throughout the term of an IVA in order for it to be successful. If at some point you start to struggle, your IP may be able to either arrange a payment holiday or negotiate with your creditors to amend the arrangement, but there is limited scope for this in most cases.
Your payments may also be reviewed during the term of the IVA, and your IP may ask you to increase them if your finances improve. You may also need to release equity from your home, if you own one, at some point in the term.
No Credit
During the IVA, you will not be able to get further credit. Although this may seem a serious restriction, it does make it more likely that you will in fact manage to get your finances under control. As part of the IVA you are required to pay back as much as you can realistically afford while still having enough to live on, so getting further credit cannot really be an option.
Once the IVA is finished, and providing you managed to stick to the agreement, you will be free to get credit again, and to start repairing your credit rating.
Creditor Agreement
Having an IVA accepted really depends on whether the creditors agree to it. Once your IP has drawn up a proposal that you’ve agreed to, this will be presented to the creditors. They then hold a meeting and vote as to whether to accept it. There’s no guarantee that they will, but your IP will help you to propose something that is likely to appeal to them.
In some cases creditors will ask for changes to be made to the agreement before they will accept it. Your IP will be able to handle the negotiation process if this happens, and will make sure you are kept informed throughout.
Legally binding
Remember, an IVA is a legally binding contract for both you and the creditors involved. This means that you have a legal responsibility but also that you are protected by the law from your creditors hassling you about the debts as long as the arrangement is in place. Once the arrangement term has elapsed, they will also be legally prevented from pursuing the debt any further.