Tag: iva benefits

An Individual Voluntary Arrangement (IVA) can be an effective debt solution if you are unable to afford your monthly repayments to creditors. Understanding the benefits of an IVA will help you decide whether this is the right path for you. In short, you make an agreement with your creditors to pay back an affordable amount over a fixed period, typically five years, and any remaining balance is written off at the end.

Below are seven key IVA advantages worth considering before you make a decision.

1. What you repay is based on your affordability

You will work with an Insolvency Practitioner when entering into an IVA, and they will negotiate with your creditors on your behalf. They assess your finances to work out what you can realistically afford, 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 draft a proposal containing a reasonable offer that works for both 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. You can learn more about eligibility in our guide on how much debt you need for an IVA.

2. Manageable monthly repayments

Your monthly payments 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 IVAs an affordable debt solution. You will be able to clear your debt while also meeting your other financial obligations. If your circumstances change during the arrangement, it is possible for your payments to go up or down depending on 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. 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, such as filing for a County Court Judgement. The agreement is legally binding, so you have protection against creditors for the full duration of the IVA.

You may still receive contact from creditors in the first few months of your IVA. This is usually because they have not yet updated their records. If this happens, simply inform them that you are in an IVA and direct them to your Insolvency Practitioner.

4. Interest and charges on unsecured debt are frozen

Some people find themselves trapped in debt because their monthly payments only cover the interest. The principal amount never goes down, and late payment charges only add to the problem. It can feel like an impossible cycle to break.

When you enter an IVA, all interest and charges on unsecured debts included in the arrangement are frozen. This stops the debt from growing and means every payment you make goes towards reducing what you owe.

5. You have a clear end date

An IVA is proposed to last for a set period, typically five or six years. During that time, you make your monthly payments and comply with the terms of the arrangement. At the end, any remaining debt is written off, giving you a clean slate to start rebuilding your finances. If you miss payments, the IVA may be extended beyond the original term. As long as you meet your obligations, the fixed period gives you a clear light at the end of the tunnel. Find out more about what happens when your IVA ends.

6. Your assets are protected from bailiffs

Without a formal debt solution in place, creditors who fail to receive payment 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, certain assets may be included in the IVA and sold, with the money going to your creditors. However, you can typically exclude items like your car if it is of reasonable value and needed for daily life. You will not have to sell your home, though you may be asked to remortgage to release equity. Once the IVA is in place, creditors can no longer take enforcement action against you.

7. You receive support throughout the process

When you enter into an IVA, you work with an Insolvency Practitioner who provides guidance and support. Together, you will devise a household budget to work out your disposable income and make sure your payments are affordable. If you have concerns at any stage, or questions about how to proceed once the IVA is complete, somebody will always be available to help. That ongoing support makes a real difference, especially when you are dealing with significant debts.

Are there downsides to an IVA?

There are some drawbacks to be aware of. An IVA will affect your credit score, and you will be subject to certain financial restrictions for the duration of the arrangement. You can read more about these in our article on the implications of an IVA. That said, if your creditors are chasing you and your debts feel unmanageable, the benefits of an IVA can far outweigh the downsides for many people.

Get in touch with Swift Debt Help today if you are struggling with debts. We can talk you through the different debt solutions available and help you find the right option for your situation.

This article is for general informational purposes only and does not constitute financial advice. Your circumstances are unique, and you should seek guidance from a qualified Insolvency Practitioner or debt adviser before making any decisions about debt solutions.