An IVA, which is short for Individual Voluntary Arrangement, is a legally binding agreement that has become popular amongst many people that have a high level of unsecured debt. With an IVA the borrower agrees to make a fixed monthly repayment towards his or her debts for a set period of time, which is usually five years. This repayment is then split between all unsecured creditors based on how much the borrower owes each creditor. At the end of the five year period any remaining debt is written off.
The eligibility requirements for an IVA are very strict. You or your partner will need to be in full time employment, and you will need to have unsecured debts of £15,000 or more to qualify. Even if you are eligible to go down the IVA route there is no guarantee that your creditors will agree to the IVA, as a vote takes place and the majority of your creditors will have to agree with the IVA for it to go ahead.
It is important to remember that an IVA is legally binding, and if you break the terms of the agreement by defaulting on your monthly repayment you will be breaking the contract. You should also remember that this is not a debt solution that should be taken lightly, as it is classed as a softer alternative to bankruptcy. You could find that going through an IVA has long term negative effects on your credit rating and your financial future.
Glossy advertisements and increased public awareness in relation to IVAs has seen an increase in the number of people taking in interest in this for of debt solution over the past couple of years, and IVA firms have seen the number of cases that they are dealing with rocket in some cases. However, there is a concern that many borrowers with high debt levels simply see the IVA as an easy way out of debt, and do not stop to think f the long term consequences.
It is important to remember that an IVA is classed as a softer alternative to bankruptcy, and even if you do qualify for an IVA you should think carefully before you enter into it. You could find that your credit and your long term financial future is significantly affected if you enter into an IVA, and therefore you should look at other alternatives before you jump in feet first.
There have been concerns that the companies that put out glossy advertisements for IVAs are making the benefits of an IVA all too clear, making people in debt really sit up and take notice. However, they do not put much emphasis on the consequences of the IVA, which you really need to take into consideration. However, you can find out more about the pros and cons of IVAs, and you can determine whether this really is the only option for you, by talking to a debt counsellor or debt charity, who can advise you on suitable alternatives.
Of course, there are cases where an IVA really may be the only answer – those with high levels of debt that they cannot even hope to repay, and who are unable to afford the repayments required for a debt management plan or for debt consolidation, may find that the only way that they can stay afloat financially is by entering into this sort of legal agreement.
Popularity: 35% [?]