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Signing of IVA documentation

7 Benefits of an IVA

An Individual Voluntary Arrangement can be an effective debt solution if you are unable to afford your monthly repayments to creditors. You will make an agreement with your creditors, based on your circumstances at the time, to make affordable payments, over typically a 5 year period with any outstanding balances being written off at the end of the IVA. 

Understanding the benefits of an IVA will help you decide if it is the right debt solution for you. Here are seven IVA advantages to consider.

1. What you repay is based on your affordability

paying using a credit card

You will work with an Insolvency Practitioner when entering into an IVA and they will negotiate with your creditors. They assess your finances to work out what you can afford, and then make an offer to your creditors. Usually, your IVA will offer them a return that is lower than the total debt owed. However, the amount you repay is still likely to be higher than it would be if you declared bankruptcy.

If your Insolvency Practitioner thinks that an IVA is the right option, they will help you to draft your proposal which will contain a reasonable offer that is beneficial for you and your creditors. Insolvency Practitioners work with creditors every day, and would only agree to propose an IVA if they believe it has a reasonable chance of being accepted by them.

2. Manageable monthly repayment

monthly payment

The monthly payments you make are calculated based on your income and financial responsibilities at that point in time. In other words, you only pay what you can realistically afford each month, making IVA’s an affordable debt solution. You will be able to clear your debt while also meeting your other financial obligations. During the course of an IVA, your circumstances may change. If this happens, it is possible for your payments to go up, or down, depending upon your affordability at the time. 

3. Creditors can no longer contact you


For many people, being chased by creditors is incredibly stressful and makes dealing with debt much harder. But once you enter into an IVA your creditors can no longer demand payment from you. They are also barred from taking legal action against you (filing for a County Court Judgement, for example). The agreement is legally binding, so you have protection against creditors for the duration of the IVA.

Often, you will still get contact from creditors in the first few months of your IVA. This is simply because they have not updated their records yet and their system still shows that you owe money. If this happens, simply inform them that you are in an IVA and then direct them to your Insolvency Practitioner. 

4. Interest and charges on unsecured debt will be frozen

cash withdrawal from atm

Some people may find themselves trapped in debt because their monthly payments are only enough to cover the interest on the debt. The principal amount never goes down, so they are unable to clear the debts. Charges for late payments only increase the amount of debt, making it even harder to manage.

When you enter an IVA, all interest and charges on unsecured debt will be frozen. This stops the debt from increasing further during the IVA. 

5. Have an end in sight

end sign

An IVA is proposed to last for a set time period, typically for five or six years. During that period, you make your monthly payments, comply with the terms of the arrangement and at the end of it, any remaining debt is written off. An IVA gives you a clean slate and you will be free from any unsecured debts included within it, so you can start rebuilding your finances. If you fail to make monthly payments on time, the IVA may be extended and you will be paying for more than the originally proposed term. However, as long as you meet your obligations, once the fixed period is over, you are free to move on with your life without debt.

6. Your assets are protected from bailiffs

assets protected

If you’re not in a formal debt solution and you fail to make your payments, your creditors can file a County Court Judgement against you. If granted, this is one step closer to them being able to send bailiffs to collect on the debt. 

Once you enter into an IVA your assets are protected. In some cases, assets will be included in the IVA, so they are sold and the money is paid to your creditors. However, you can exclude certain assets like your car if it is of reasonable value and required for day to day living. The majority of your possessions will automatically be excluded already and you will not have to sell your home, though you may be asked to remortgage to release equity. 

Once the IVA begins, you have legal protection and your creditors can no longer take action against you, including sending bailiffs to collect on the debt.

7. You will receive debt support throughout the process

holding someone's hand to support them through debt problems

When you enter into an IVA, you work with an Insolvency Practitioner who can give you advice and support. You will devise a household budget in order to work out your disposable income and ensure this is affordable. If you have concerns about the IVA or how to proceed once it is finished, somebody will always be on hand to answer your questions. Having that support makes a big difference, especially if you are struggling with large debts.

There are some downsides to an IVA you should consider, such as an impact on your credit score. You are also subject to certain financial restrictions during an IVA. But if you are having difficulty paying your debts and your creditors are chasing you for the debt, there are a lot of benefits to an IVA

Get in touch with Swift Debt Help today if you are struggling with debts. We can give you expert advice and talk you through the different debt solutions that are available to you.

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May not be suitable in all circumstances, Fees may apply, your credit rating may be affected.

Disclaimer: For guidance only. Financial information entered must be accurate and would require verification. Other factors will influence your most suitable debt solution.

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