Is an IVA the best way to pay back your debts?

You’ve arrived at this guide in the hope of a silver bullet – a debt solution that will finally provide you with hope that in the future you could be debt free. Like many in the UK, you’re feeling the burden of debt – phone calls, debt collectors, endless letters. For many an IVA provides a debt solution that brings financial trouble to an end. But is an IVA the best way to pay back your debts? Let’s find out.

Key question: What is an IVA?

IVA is short for ‘Individual Voluntary Arrangement’. An IVA is a debt solution that acts as an agreement between yourself and your creditors. It sets out a fixed repayment schedule over the course of either five or six years (which one of the two will depend on whether you need to remortgage your home as part of the agreement).

Who is an IVA suitable for?

To be eligible for an IVA you must meet several criteria:

  • You must live in England – In other UK regions there are different debt solutions, head to the following pages to find out more: Northern Ireland | Scotland | Wales.
  • You need to owe a minimum debt of £5,000 to at least two lenders (some providers require that you owe a total of £15,000).
  • Your debts must be non-priority debts – non-priority debts include credit cards, loans and store cards, while non-priority debts include things such as utility bills, your council tax and mortgage.

The Benefits of an IVA

  • An IVA allows you to keep your home (although you may need to release value from it if your home has enough equity); this compares to bankruptcy, which is a form of insolvency where most, if not all, your assets are sold.
  • An IVA is designed around your financial circumstances,
  • Once the IVA is agreed, the interest and charges on your unsecured debt will be frozen, so any repayments you make goes towards the actual debt – not an ever-increasing total that includes interest and fees.
  • Your creditors aren’t allowed to continue chasing you for payment. The only reason they can contact you is to send you a statement of your account.
  • An IVA will only involve repaying a percentage of what you owe. The remaining debt will be written off at the end of the term.

The Drawbacks of an IVA

  • Your creditors do not have to accept your IVA proposal. However if 75% of them agree to it then the IVA would be approved.
  • An IVA is a legally binding agreement on both sides. Just as your creditors wouldn’t be able to contact you, you’d equally need to keep up with your obligations. Not meeting the repayment terms could worsen your financial situation.
  • An IVA, like all insolvency solutions, will affect your credit score.
  • Your details will be listed on the Individual Insolvency Register.
  • An IVA involves fees that are paid to the provider, however these are taken out of your monthly repayments (in contrast to bankruptcy, which requires that you make a payment upfront of £680).

Alternatives to an IVA

Debt Management Plan (DMP)

A Debt Management Plan is a debt assistance solution with a repayment schedule that fits in with your income and expenditure.

Learn more about Debt Management Plans (DMP)

Debt Relief Order (DRO)

A Debt Relief Order (DRO) is a type of insolvency. A DRO had a duration of 12 months after approval.

Learn more about Debt Relief Order

Bankruptcy

Bankruptcy should be considered as a final debt assistance service once all other avenues are exhausted.

Learn more about Bankruptcy

Equity Release

Equity release is an alternative to remortgaging for those aged 55 and over. The release of equity in your home to partially or fully repay your debts.

Learn more about Equity Release

Minimal Assets Process (MAP)

MAP is a form of unsecured bad debt help available to debtors in Scotland who have a low income.

Learn more about Minimal Assets Process (MAP)

Debt Arrangement Scheme

Debt Arrangement Scheme (DAS) is a debt assistance service managed by the Scottish Government.

Learn more about Debt Arrangement Schemes

Trust Deed

A Trust Deed is a legally binding debt help service in Scotland, to make reduced payments across your debts for a set period.

Learn more about Trust Deeds

Need expert debt advice as to whether an IVA is right for you?

We’ve helped hundreds of people just like you in working their way through their debts. If you’d like free advice and guidance as to whether an IVA would be right for your unique circumstances our team are on hand to talk. Feel free to call them directly on freephone 0800 002 9051 or send our team a message via our contact page.

 

 

 

 

*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

National Debt Help
How we use cookies   X