If you have debts from credit cards that are out of control, then an Individual Voluntary Arrangement (IVA) may help. IVAs are designed to help people who have unsecured debts such as credit cards, store cards and unsecured loans that they can no longer manage.
The intention of an IVA is that it allows you to work towards clearing your debts without ending up bankrupt.
Requirements of an IVA
There are few restrictions on who can get an IVA, however they are normally recommended for people who have debts that amount to at least £12,000. It is also normally the case that for an IVA your debts should be owed to 3 or more different lenders. If these apply to you, or even if they don’t, you should consult an Insolvency Practitioner if your debt payments have become unmanageable.
Interim Order
The first thing that will happen if you do go for an IVA, is that your IP will apply for an Interim Order protecting you from legal action for the moment. Next, you will decide what you think you can afford to pay monthly as part of the IVA plan, and your IP will draw up a proposal to put to your creditors.
Creditor Negotiation
When you find yourself struggling to meet credit card payments, you always have the option of trying to negotiate with the creditor yourself. You can ask them to reduce your payments, for example. There is never any guarantee that they will agree to do this, and dealing with them in these circumstances can be a stressful and difficult process. The advantage to an IVA, is that they cannot pursue you legally for the debt; also your IP will be negotiating on your behalf, saving you at least some of the stress.
IVA Payments
If your creditors vote to accept your IVA proposal, you then start making a single IVA payment each month, and your IP handles the distribution of this to your creditors. Normally, an IVA will involve paying back only a portion of what you owe, but when the term is complete your debts are effectively settled, and any outstanding balance written off.
Providing you get the right proposal and manage to stick to it, an IVA can genuinely offer you the chance to clear unmanageable debts, and work towards a more secure future. However, it is hugely important that you only commit to paying back what you can realistically afford for the IVA to be a success.