Everything You Need to Know about an IVA Debt Management Plan
An IVA is one of the most popular ways in the UK to solve your debt problems and avoid bankruptcy. What makes IVA such an appealing debt solution is that it can be flexible to suit your particular set of debts. However, there are also a few risks that people often overlook. If you want to find out more about an IVA you’ve come to the right place. This article answers any questions that you might have about an IVA.
What is an IVA?
IVA stands for Individual voluntary arrangement and is a legally binding agreement between you and your creditor to settle your debt. Once the agreement is in effect your creditor no longer has the authority to petition you to make you bankrupt or take any other legal action against you.
If your creditor wants to contact you, they have to go through your insolvency practitioner who is assigned to you by the Insolvency practitioners association to take care of your case.
With an IVA you write off some of your debts and consolidate the rest into one affordable monthly payment which saves you a lot of money that you would have had to pay in interest fees otherwise.
What are the benefits of an IVA?
IVA gets your creditor off your back, legally stopping them from chasing you for your debt. More importantly, an IVA helps you avoid bankruptcy and property repossession. Moreover, an IVA is limited by time; it generally lasts around 5 to 6 years and you only have to pay your creditor while it is in place. Once the agreement is over you don't have to pay any more money to your creditor or the insolvency practitioner.
Is an IVA right for you?
An IVA is usually a good option if your debt is more than £10,000 anything less means you will have to pay much higher fees. Moreover, you have to pay a fixed amount to your creditor every month for a few years which means you are going to need a stable and reliable source of income for as long as your IVA remains in effect. Plus if you don't have spare income or a lump sum that you will pay to your creditor, IVA might not be for you.
An IVA is a great option when you don't want to deal with your creditors directly. Your creditor has to reach you through a middle man i.e the insolvency practitioner.
What are the potential risks of an IVA?
An IVA can be quite expensive and can cost somewhere around £4,000 to £5,000 that you’ll have to pay in installments. You might also have to remortgage your house if you own one by the end or pay into your IVA for an extra 12 months. It will also affect your credit score which will make it difficult for you to get credit.
An IVA can be a great way to get out of a tough financial situation but it comes with its fair share of risk which is why you need to make sure that you know all the IVA pros and cons before making a final decision.