Cutting through the processes of the various debt solutions is not always easy, and IVAs are no different. Understanding the basic principles of an IVA will help when deciding whether or not this is the right debt solution.
Can Everyone With Debt Problems Apply for an IVA?
Like many debt solutions on the market, an IVA comes with eligibility requirements. One of the main requirements of an Individual Voluntary Arrangement is that debtors must have debts of at least £15,000. These debts must also come from two or more creditors. People who meet these requirements may be eligible to apply but this does not mean the IVA will simply be accepted.
Why Would My IVA Application Not Be Accepted?
There are a few different reasons including the ability to make actual existing repayments. Those who are in full time employment who can make repayments may not actually be eligible for an IVA. One of the stipulations is that debtors must be unable to meet their current repayments. An alternative may be to arrange a new repayment plan with creditors with lower repayments for a period of time. An IVA must also be accepted by at least 75% of the creditors before it can be accepted.
Will an IVA be Made a Matter of Public Record?
Unlike bankruptcy an IVA is a confidential matter and will not be made public. During a bankruptcy process an advertisement is placed in a national newspaper but this does not happen during an IVA. The Individual Voluntary Arrangement is between the debtor and creditors and no one else need know about this agreement. A debt advisor or Insolvency Practitioner will also be involved in the process.
Can All My Debts Be Cleared with an IVA?
All unsecured debts can usually be cleared using an IVA. Secured debts such as mortgages and credit agreements are a different matter and will not usually be included in the arrangement. Other secured debts may be car loans or credit agreements that have been secured on property. Unsecured personal loans, overdrafts and credit cards and arrears can be included in an IVA.
How Long Will an IVA Take to Finish?
The length of the IVA is sometimes a stumbling block for many people. The complete length should be five years of monthly payments, and for some people this is a long term commitment. But debtors should remember that these repayments will be reduced and will take the form of one monthly payment. Debtors will no longer have to deal with their creditors once an IVA is in place. Once the IVA has completed this will be a completely fresh start.
Can I Lose My House By Using an IVA?
Debtors will not be asked to sell their property but the value of the property will be taken into account during the assessment. It may be the case that some equity will be required to be released at some point during the IVA. If this is the case then this will happen near the end of the fifth year as the IVA is nearing its completion period.
Will I Still Be Paying Interest on Debts During an IVA?
No, once the IVA has been accepted the interest will stop. There will be an assessment on how much the debtor must pay in monthly payments and this will be calculated by the Insolvency Practitioner. Most debt advisors will claim that around 75% of the debts can wiped out. But this is not always the case and it will depend on the debtor’s financial circumstances and the agreement of the creditors.
Can I Apply if I am Not a Homeowner?
Yes, people who rent their accommodation are eligible to apply for an IVA. The IVA will not affect their tenant status as there is no equity to release from a rented home. Business owners can also apply for an IVA without it affecting their business status. A debt solution as such bankruptcy can severely curtail business operations especially for directors of limited companies.
Who Can I Talk About Arranging an IVA?
Anyone who is considering this debt solution should seek professional advice. It will be beneficial to talk to someone from either the Citizen’s Advice or the Consumer Credit Counselling Service (CCCS). These debt help agencies are free to use and will be able to offer advice on the various debt solutions available. There may be some alternatives to an IVA that will be better suited to the individual’s debt situation.