Guest Post by Melanie Taylor
If you’re struggling with a significant amount of unsecured debt, and you don’t think you can repay it in a realistic amount of time, it’s important to find a debt solution that could improve your finances as soon as possible.
One option is an IVA, or an Individual Voluntary Arrangement. If you’re having serious difficulty repaying your unsecured debts, entering into an IVA could allow you to make one affordable repayment tailored to your circumstances every month.
What’s more, on successful completion of your agreement, the remainder of the unsecured debt included in the IVA would be written off, leaving you debt-free.
What exactly is an IVA?
An IVA is a legally binding agreement between you and your unsecured lenders. Once your IVA is agreed, you would:
- Make reduced monthly payments
- Be protected from any further action by your lenders
- Potentially freeze interest and other charges on your debts
When entering into an IVA, you agree with your unsecured lenders to repay as much of your debts as you can over a realistic timeframe – usually five years. On successful completion of your IVA, the remaining debt will then be written off, leaving you with no further liability towards your unsecured debts.
As a form of insolvency, an IVA offers an alternative to bankruptcy that could protect you from some of the potential downsides – such as the repossession of your home.
How do I get an IVA?
An IVA must be agreed with the help of an Insolvency Practitioner (IP) – an expert who will only recommend an IVA you for if it is the most appropriate solution for your financial situation.
If it looks like the best approach, your IP will then draw up an IVA proposal: a plan based on what you owe and what you can reasonably afford to repay each month, which is then submitted to your lenders.
For your IVA to be accepted, the majority of your lenders – that is, those holding 75% of your total debt value or more – must then agree to it before your IVA can go ahead.
Is an IVA right for me?
Entering into an IVA could only be a suitable solution if you’re unable to meet your monthly repayments as agreed – but you can still commit to making regular (smaller) monthly payments.
If you’re a homeowner, it’s very likely you’ll have to re-mortgage to release some of the equity in your property in the 54th month of your IVA.
Furthermore, an IVA will remain on your credit history for 6 years from the day it starts – and you must be a resident of England, Wales or Northern Ireland to potentially qualify.
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Note to readers: An IVA is a debt settlement program available to residents of the United Kingdom, and is not available in the US. It seems to be a kind of halfway program between an informal debt settlement and a Chapter 13, in that it is not a bankruptcy, but it is legally binding and it does afford many of the same legal protections that bankruptcy provides.
Given the extent of debt problems here in the US, having a plan similar to the IVA here would be a step in the right direction.
Thanks for reading! Kevin