An individual voluntary arrangement – initialised as an IVA – is a legally binding agreement designed to help you clear debts with your creditors at rates which are affordable to you. Rather than simply being a way to reduce your outstanding balances to creditors, an IVA is classed as a form of insolvency. As such, agreeing to an IVA with creditors can have a significant impact on your ability to get credit in the future, and more.
As such, it is always a good idea to seek professional advice prior to signing an IVA. Check out this helpful and comprehensive explanation from Carrington Dean, to get an idea of what to expect when dealing with the various conditions of an IVA:
First things first, you need to know if you are eligible to get an IVA. Not everyone will be entitled to avail from this agreement, so please consider the qualifying criteria before you commit to an IVA.
Who is an IVA Suitable For?
IVAs are generally exclusive to those who have a frequent and regular income which is unlikely to change over the course of an agreement. As it is crucial to be in a position to make regular payments when taking out an IVA, this is a major consideration. Those who may have a lump sum which could be used to pay towards an IVA can also find themselves in a position where this could work out for them.
Not all debts can be included. Most common debt types can be included, such as credit cards, personal loans, overdrafts, gas and electric arrears and payday loans. But secured debts (like mortgages or secured loans) and some other debts (including student loans, fines and child support) will still have to be paid separately, outside of the IVA. This is important to know for anyone striving for financial independence.
Points to Consider
Taking out an IVA can potentially affect you in a number of ways, which includes your finances, your profession, and even where you live.
Before you take out an IVA, please be prepared to deal with:
- An effect on your credit rating for six years, from the date of the agreement
- Not being able to take out any debts above £500 during the full course of the IVA.
- An extension of the IVA term if you miss repayments as per the agreement
- A potential change to your profession; accountants and solicitors can have their ability to practice affected
- The likelihood of forfeiting significant earnings made following the agreement – or a portion of them
- This also affects work bonuses or anything which would significantly change your income
- Details pertaining to your IVA recorded on the Insolvency Register.
- If you enter into IVA, all details are recorded on the Insolvency Register.
As with any major decision, a little planning and foresight can help you deal with any circumstances which may arise further down the line. If you are set on getting an IVA, make sure you are fully aware of how it can affect you.