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Information On IVA Debt Help

You may have heard of an IVA but not be quite sure what it is, how it works or whether it may be appropriate for your situation. This page should help you answer all of those questions, by providing information and unbiased advice on this particular debt solution. If you do find that it is something you would like to check out further with a specialist company that can set up an IVA for you, I have also made some recommendations for a few of the most reputable companies on the main IVA UK page of this site.

Information On IVA – What Is It?

An individual voluntary arrangement is something that was set up by the UK government in the 1980s to provide an alternative to going bankrupt. The idea was to provide a less drastic option that would enable people to write off a substantial part of their debts and pay back only a proportion of it. The consequences were less serious in many respects compared to bankruptcy, so this new idea snowballed to become one of the most popular options for solving serious debt situations in the UK.

Needless to say, the solution is only available in the UK and must relate to creditors who are also UK based. The main principle is that for a fixed period you make an agreed monthly payment based on what you can realistically afford after paying all your basic household costs. The period is usually for five years and at the end of that time any debts left unpaid are written off. How much gets written off will depend on your situation, but for some people it can be up to 70% of their total debts.

It is not difficult to see that using an individual voluntary arrangement makes it possible to eliminate debts that would be impossible to pay back in full.

Information On IVA – Other Pros And Cons

These arrangements are actually formal and legally binding, which is an important point to understand. You must not think of them in the same way as a debt management plan, as such plans are informal and relatively easy to get out of. Imagine if your circumstances changed and you suddenly became better off. With a debt management plan you could cancel the plan and make other arrangements, but with an IVA it is not so easy to get out of once you have signed up. It is not impossible, but you need to have very good reasons. So if you did come into money you would be expected to use at least a proportion of it to pay your creditors. So in theory you could end up paying all your debts back and not writing anything off.

On the other hand, the formality does bring with it some advantages. With a debt management plan you have no way of compelling any creditors to join in the plan if they do not wish to. This can be a major stumbling block to setting up a solution to your debt problems. With an individual voluntary arrangement you only need the agreement of creditors representing 75% of your total debts for the agreement to be binding on all your creditors. This is a huge advantage if you have one or two creditors who are unwilling to sign up for the arrangement.

Information On IVA – Will I Be Eligible?

Even though an individual voluntary arrangement has an element of compulsion for unwilling creditors, you still need to get 75% of them to vote in favour of the agreement. By signing up for the arrangement they are effectively agreeing that they will only be repaid a fraction of what you owe them, so why would they do this? They are unlikely to agree unless they can see that what they will get through the IVA is probably the best they can hope for. If they think that you could afford to repay the full amount, they are unlikely to want to participate.

The reason they will sign up is if it is obvious that your only alternative is bankruptcy and that if you do file for bankruptcy they might end up with even less or nothing at all. If an IVA looks like the best bet they will agree to it. For this reason, an individual voluntary arrangement cannot work for someone who is not in a very desperate financial situation. You will need to prove to your creditors that you genuinely cannot afford to repay the full amount, by being transparent about your income and expenditure. So the arrangement will only be offered to people where it can be shown that they would not be able to manage an alternative, such as a debt management plan, whereby you repay the full amount of your debts.

Other than that, the basic criteria are usually that you must have at least £15,000 worth of unsecured debts to at least two or three creditors. Unsecured debts are what most of us get into debt difficulties with and include things like credit cards and personal loans.

IVA Information – Who Can Set One Up For Me?

If after reading the above you think that an individual voluntary arrangement might provide the solution to your debt problems, your next step is to find a good debt specialist to examine your situation and advise you on the best course of action. The process is pretty straightforward. All the leading companies have websites where you just complete a simple form to provide a few basic details, after which they phone you back to run through your situation in more detail. They will then use this information to come up with advice on the best way to eliminate your debts, which may be an IVA if that is appropriate.

You do need to be careful about which company you approach because there are unfortunately some organisations that are only interested in putting you on a plan that will make money for them, rather than solve your problems. It is therefore possible to end up paying ridiculous fees and being kept in debt for far longer than you need to be. A good rule of thumb is to always apply to more than one company, and you can easily avoid the dodgy ones by sticking to well established, properly regulated companies that have been successfully helping people out of debt for years.

You can find a list of some of the most reputable and effective IVA providers on the main IVA page of this site, or you can apply for debt help right now by completing the form at the bottom of this page.

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