What is Individual Voluntary Arrangement? | How it Works?

Individual Voluntary Arrangement (IVA) is a type of formal agreement that occurs between you and the people to whom you owe money. This agreement allows you to return a very little percentage of the debt that you owe. 

You might need to repay a huge amount of money based on the debts and that will not affect you to qualify for the IVA process. Generally, IVA is set by the Insolvency Practitioner and it can be addressed as the legally binding agreement. 

With the help of the IVA, you can pay off many common debts such as personal loans, mortgage shortfalls, overdrafts, and many others. 

You should know that there are many debts that you can’t pay with the help of IVA such as Student Loans, Child maintenance, Car finance, and many others. Here, we are about to discuss everything you need to about Individual Voluntary Arrangement. 

Benefits of Individual Voluntary Arrangement 

You can find various benefits associated with an Individual Voluntary Arrangement and those are mentioned below:

  1. IVA helps you to keep your home and this agreement the car loan to remains unaffected. 
  2. Because of this agreement, you don’t need to pay any upfront costs and will subsequently help you to get free from debt. 
  3. You can use a phone to apply for an IVA and your creditors are not allowed to call you. They can’t even text or email you and they are not allowed to post letters as well. 
  4. You should know that during the time of IVA, the interest and charges are preserved. 
  5. This agreement provides you 100% protection from the debt collectors. You can even stay protected from bailiffs. 

Know About IVA and How it Works? 

When you see it for the first time, it might seem to be complicated but when you get to know about IVA it will become simpler. 

  • IVA Calculator: IVA calculator helps you to check whether you are eligible for this agreement or not. 
  • Credit Check: It will not affect the score and you can not classify it as an application. After running the credit check, you will find the list of your debts. On the credit check, you can find some debts and usually, they are not displayed. You need to add those checks manually. 
  • Income and Expenditure: There will be an advisor who will check through your income and expenditure. They will check where you are spending money and the reasons behind your spending. Thus, they will help you to know whether you are solvent or not. 
  • Allowances: For your daily expenses, you need to take permission from your advisor as they allocate the allowances for you. The allowances include entertainment, mobile phone, food shopping, and many other things. You should keep in mind that they allocate this allowance towards future spending. 
  • IVA Proposal: Generally, this proposal is sent to people who owe money. It is one kind of formal agreement. Basically, in this proposal, you will find they offer you to pay monthly on a regular basis towards the debt for 5 years. In return, you have to pay a large amount of debt to the Insolvency Practitioner. 
  • Acceptance: When the creditors accept the monthly proposal, make sure to pay 60 monthly payments until it gets complete. 
  • Debt Free: You should know that you will be completely free at the end of the Individual Voluntary Arrangement. 

Criteria to Qualify for an IVA

Before applying for an IVA, you should note the criteria to qualify for an IVA. The people who have a regular source of income are only applicable to an IVA. You might have to pay a lump sum amount towards your debt but this condition will not affect you to qualify for an IVA. 

What is the Debt Amount in an IVA? 

You should know that all debts can not be included in an IVA. The debts which can be included are overdrafts, credit cards, payday loans, gas and electric arrears, and many as such. 

You might have a student loan but you cannot pay that through this agreement. There are many IVA debts that you have to pay separately like mortgages, secured loans, etc. 

Minimum payment in IVA

Individual Voluntary Agreement has not set any minimum payment. But make sure that you are capable of paying a reasonable amount every month. If you can’t afford that, then the creditors will not accept your IVA proposal. If you are in this situation, then the debt relief order is the best solution for you. 

How long an IVA Sojourns? 

You need to keep in mind that an IVA stays for 5 years but you can extend it for another 12 months. At that time, you have to make the agreed payments. There is a possibility that you might be unable to pay a huge amount within a particular time-frame. 

Then, IVA will end at the earliest. Sometimes, it can also happen that you are not able to pay your agreed amount within six months. This is when the IP or insolvency practitioner will work in your favor. At that time, your creditors might extend the payment arrangements. 

Restrictions you might Face on an IVA

Make sure to manage the Individual Voluntary Agreement. Otherwise, you might face severe consequences on your personal, professional and financial life. 

  1. You should know that your credit rating can get affected for the next six years since the initiation of the agreement. 
  2. For the entire term of your IVA, make sure to keep a budget agreed with the supplier. 
  3. Because of the IVA, your higher purchase of agreements might be affected.
  4. If you received any additional assets, then you need to declare that during the IVA. You might have to pay an extra amount based on that.  
  5. It can be possible that you might earn an additional income or get a bonus during the IVA. You might have to pay a certain amount in addition to your IVA as the normal contribution. 
  6. During the IVA, you are unable to take out new debts above £500. 

IVA Can Affect Your Home 

During IVA, you won’t be able to sell your residence. Six months before the end of your IVA, you can remortgage your home and it depends on the amount of your home. 

If you are planning to re-mortgage, then you can not increase the mortgage more than 85% of your property’s valuation. While on an IVA, you will find it difficult to buy a property. All the information about mortgaging and remortgaging can be obtained from your Insolvency Practitioner (IP). 

What You will Face When You Miss Payments During IVA? 

Sometimes, you might be unable to make a payment during IVA. When it happens, make sure to discuss it with your IP. 

If you have an emergency, then your IVA might allow you to take a short payment break. In case, the change is small, then you can change the monthly payments plan and the agreement allows you to do so.

When you need a longer payment break, then your IP should contact the creditors. If they do not agree to do this, then you can’t take a longer payment break. If you miss any payment, then it will be added towards the end. 

IVA Can Affect the Credit Rating

When you enter into an IVA, the credit rating will appear on your credit file for six years and it starts from that date when the IVA is approved. 

  • Sometimes, the IVA might get accomplished early but it will still appear on the credit file for 6 years. 
  • Your IVA might take more than 6 years and that will appear on your credit file. When you complete the IVA, it will be marked as resolved. 

You should know that during IVA, your creditor will mark Default on your credit file. This default signifies that the original agreement has been broken. You will notice this on your credit file for 6 years. 

What Happens to Your Assets During IVA? 

Many times Assets are not included in the IVA. When you are into an IVA, your IP or Insolvency Practitioner will deal with your assets. Various assets such as cars, houses, precious jewelry, shares, and many others might belong to you. Thus, all the IVAs are not the same and in most cases, you can keep your car, home, jewelry, and even your mobile. 

Jobs that can be Affected Because of IVA

Jobs can get affected when you enter into an IVA. Some of the job fields that might be affected are Law, Property, Finance, and Accountancy.

Sometimes, you might not be sure whether you can keep your job or not during IVA. Thus, go through the points to get to the details:

  • At that time, you need to check the contract of your employment and the details. 
  • Make sure to discuss this with your Insolvency Practitioner to know whether you can keep your job or not. 
  • You can contact your trade union and can even talk to the HR department. 

How to Set Up an IVA? 

If you want to set up an IVA, then you need to contact your Insolvency Practitioner or IP and you have to pay the requisite fees. Generally, these fees are included in your monthly payments. However, before setting up an IVA, you should not pay any up-front charges. 

Information to Set Up an IVA 

Before taking an IVA, make sure to discuss the situation with an experienced debt adviser. They can help you to make the right decision. There are many other aspects regarding which a debt advisor can prove to be the ultimate guide, such as: 

  1. They will listen to all your queries and have the capability to deal with every situation confidently. Thus, providing you recommendable ways to manage your money. 
  2. Debt Advisor will not judge you and will provide ways to deal with every debt situation. 
  3. They will listen to your problems and will check whether you are eligible to claim all the benefits or not. 

An open conversation with an experienced debt adviser will help you to manage your debts. A debt advisor will help you to find the best way to clear your debts. 

Many people face debt issues and based on their common problems, you can easily monitor your present scenario. Their cards might be overused and no one wants to lend money. 

To find the possible way, you should talk to the IVA register. You can contact them online, over the phone. But face to face is the best option that you should select. 

Your Responsibility 

If you do not keep up with your repayments, then your IVA might get canceled. Because of the Insolvency Practitioner, you can get bankrupt. So, make sure to make payments on the prescribed time and before the due date. 

Check whether IVA is a Good Option for you or Not

With the help of the IVA, you are able to repay multiple IVA debts and you can reduce the monthly debt repayments as well. This agreement provides you protection from the creditors. Thus, they will not be able to put your property on auction. 

You should know that it can become very expensive in the long term. During this agreement, you will not be able to save money. You can’t make important contributions such as pension payments. Furthermore, you might be forced to remortgage your residence.

Because of the IVA, you may find it difficult to get a new job as it will appear on your credit report for years. If you struggle to make repayments, then the IVA might fail. Thus, before you choose the IVA, you must consider all the above aspects in detail.