How an IVA Works
Individual Voluntary Arrangements (IVA) are designed to help those suffering with unaffordable levels of unsecured debt. Those who cannot afford to repay all of the unsecured debt but wish to benefit from making a reduced monthly payment over a set period of time, could find that an IVA is a perfect choice of debt solution.
If you are looking to avoid bankruptcy and pay off the debt that you can afford, you should be aware of how IVAs work. Below gives you a guide to how an IVA works but please call one of our IVA advisors today for personalised IVA advice.
How an IVA Works
- Speak to an IVA advisor
Before embarking on an IVA you will have to speak to a professional IVA advisor about your current personal financial circumstances, such as debt level and employment status.
They will be in the best position to tell you whether an IVA is right for you or whether your circumstances are better suited to an alternate debt solution.
- IVA Proposal
If you find that an IVA looks to be the most suitable financial solution for you and you decide that this is right for you, the next stage will be putting an IVA proposal together for your unsecured creditors.
We will work with you in getting this together and it will contain various bits of your financial information, such as how much each of your unsecured creditors can expect to receive if the IVA is accepted.
- Meeting of Creditors
Once your IVA proposal has been drawn up, each of your unsecured creditors will receive a copy and can then decide whether to vote in favour or reject your IVA.
In order for the IVA to be accepted, 75% of your creditors (in terms of debt value) must agree to the terms of the IVA proposal. The IVA is legally binding between you and your creditors which means that once it has been agreed, your creditors cannot change their mind about the plan – although failure to make the agreed IVA payments means that your creditors can start bankruptcy proceedings against you.
- Your IVA begins…
Once your IVA has began, interest on your unsecured debts will be frozen and you will make the agreed IVA payments which will be distributed between your creditors as agreed in the IVA proposal.
The typical term of an IVA is 60 months. Some homeowners may be required to release some of the equity in their home in order to repay more of the debt.
- You have made all your IVA payment, and you are debt free!
Once you have successfully completed your IVA by making your final IVA payment, any unpaid debt will be written off. It is important to note that the IVA will remain on your credit file for a further year which may make it harder to get accepted for credit during this time (if that is something you wish to do).