If you live in the UK and you are struggling with debt, you are not alone! Luckily enough there are formal solutions which can write off a portion of your debt and avoid bankruptcy.
In this article we will take a closer look at how an Individual Voluntary Arrangement (IVA) can help you if you are struggling with unsecured debts of £5000 or more.
What’s an IVA?
An individual voluntary arrangement is a formal legally binding agreement made between yourself and the companies which you owe money to. All of your debts are bundled together into one easily affordable monthly payment, usually for a period of 60 months (5 years). You contribute payments into this plan of a minimum of £90 per month for 5 years. At the end of the 5 years the is remainder of the unsecured debt is written off, leaving you completely debt free.
What is the criteria for an IVA?
There is no official criteria for an IVA, although IVA companies usually look for a particular criteria which enables a high majority of IVA cases to be accepted by the creditors the first time around. This criteria usually includes:
- A minimum of £5000 of unsecured debt
- Owed to 2 or more companies
- You must have a regular income
- You must be a resident of the United Kingdom
- You must have a UK bank account
- The majority of your debt should be with creditors that will approve your IVA
How much do I have to pay?
Luckily enough there are no upfront fees to an IVA. You will pay one monthly payment which is based on your affordability. This will take into account all of your essential household bills and living costs, the remainder will be used towards your debt plan. Most IVA’s start from £90 per month, for a typical term of 60 months.
Will my credit score be affected?
Yes. Your IVA will be recorded on your credit file for a minimum period of 1 year after your IVA has completed. As IVA’s typically last for 5 years, this would mean your IVA would be recorded on your file for 72 months. After this point you will be able to rebuild your credit once again. We would always recommend that you did not take out further credit in the future, so that you can avoid a similar situation.
Where can I get an IVA?
IVA companies all charge fees to administer your IVA. These are commonly known as insolvency fees. Your insolvency fees will be built in to your monthly payments and they are usually set at an amount which is relevant to your debt level. Whether you choose a debt charity or a private IVA company, these fees are usually a similar amount. So choose a company with great reviews and a great reputation!