Do these apply to you?
IVA Debt Solutions
Many debt solutions are NOT legally binding
The problem with many debt solutions which are advertised is that they are not legally binding. This means that although they may greatly reduce your repayments each month, you will still have to pay all of your debt back. Have you ever stopped to wonder just how long this will take?
E.G. If you owe £15,000 and normally repay this at the rate of £250/mth, you will be repaying this debt for 5 years. However, if you reduce your monthly repayments to £120/mth to fit your budget, you will be repaying your debt for at least 10 years and even this is not a guaranteed length of time because additional interest and charges may be added. This means that there is no light at the end of the tunnel.
How does the IVA Help?
The Individual Voluntary Arrangement or IVA is a Formal legally binding debt solution. It allows someone who is in financial difficulty to make a formal proposal to settle his/her debts within a reasonable and fixed period of time. This period is normally no longer than 5 years. The repayment proposal is based on what you can afford to pay and after you have paid for the time agreed, your debt will be settled in full.
Once agreed, an IVA will also prevents creditors from adding any further interest to your accounts or taking any further action such as County Court Judgements.
Who Can use an IVA?
The suitability of the IVA solution will depend on your personal circumstances. Normally your personal debts must be above £15,000 with 4 or more different creditors. You must also be able to offer a reasonable monthly payment to your creditors. This will vary depending on the debt. However, as a minimum you will need to be able to afford at least £200/mth.
Advantages of an IVA:
- If you follow the agreed terms, you will be debt free in 5 years time. Up to 70% of your debt may be written off.
- This is a legally binding solution so no further interest or charges can be added to the debt, by law. You also get protection against possible court action.
- Agreed monthly payment plans will remain fixed unless your income level dramatically increases.
- It is a private agreement – only you, your advisor and your creditors need know about it.
- You can continue to practise as a professional person (i.e. accountant, solicitor, doctor etc) or as a director of a company
Disadvantages of an IVA:
- If you have equity in your house or valuable assets you may be required to realise them to pay your creditors.
- Normally, an IVA cannot be used if your total debts are under £15,000.
- Generally you need to be able to afford monthly payments of £200 or more