The Benefits of an IVA
An IVA or individual voluntary arrangement is an option for people who are currently in debt and struggling to pay it off. An insolvency practitioner arranges a formal agreement between yourself and your creditors to pay off some or all of the debt. There are several great benefits of an IVA as a debt management solution; this article takes you through these benefits.
Some of your debt is written off
When you set up an IVA, your insolvency practitioner will discuss and agree with the creditors on the amount that you will pay back. A lot of the time, you won’t need to pay back the total amount that you owe; some of the debt will be written off, making it easier for you to pay back the remaining total.
You will have a plan to be debt free
Debt can be a huge burden; it can be challenging to see a way out when the interest rate keeps piling up and you can’t afford to pay it back. An IVA gives you a plan and a future where you will be debt free. The agreement between you and your creditors will last a set number of years; at the end of that time period, you will be debt free and able to move on with your life. You just have to make sure you stick to the agreement by paying each month.
Legally binding
An IVA is a legally binding agreement; 75% of your creditors must agree to the IVA for it to be put into force. Once agreed, your creditors can no longer contact you or threaten any forms of legal action. All of the communication with your creditors will go through the insolvency practitioner. This leaves you to focus on getting on with your life, as long as you keep up the regular payments. Constant calls, emails and letters from creditors can be very difficult to deal with; they can even leave some people with mental health issues. An IVA takes all this pressure away and allows you to relax, knowing everything is being sorted.
You will receive support
When you take out an IVA, you will be working with a debt management company and an insolvency practitioner on most occasions. They will provide you with ongoing support and answer any questions you might have. Many debt management companies also offer general advice on IVA agreements, so you can decide if this solution is right for your situation.
Tailored payments
The amount you agree to pay back each month will be tailored to your income and your outgoings. Meaning it will be affordable and shouldn’t stop you from living your life and enjoying things. You may need to cut back on the extras to ensure you have enough money to pay into the IVA, but it will not put you in a situation where you can’t afford the basics.
Keep your home
Many debt management solutions require you to sell your home to free up equity to pay back your debts. An IVA protects your home, so you don’t have to sell it to pay back your debts. You may be required to remortgage your property as part of the agreement, but you won’t be asked to sell and move house. This can be a huge relief for many homeowners who don’t want to leave their homes and find somewhere else to buy or be forced into renting a property.
An IVA is a good solution for people with significant amounts of debt. However, there are some disadvantages you should consider before agreeing to the IVA. It will impact your credit score for six years or more; the minimum is six years, but if the IVA lasts longer, it will continue to have an impact. You will also be registered on the insolvency register, which can impact your ability to gain access to loans or other types of finance in the future. There are also fees to pay with an IVA, but these will be factored into your monthly payments that are based on the amount you can afford to pay back. Finally, not all IVAs are accepted, the majority are, but there is a chance your creditors won't agree to the IVA.
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