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IVA (Individual Voluntary Arrangements): Get a Quick Overview

An IVA or Individual Voluntary Arrangement is basically a legal contract that done between your creditors and you. It allows you to repay a certain amount of money depending upon a new agreement. As well as, the court will also approve it and the creditors must stick to it.

An IVA can be the right choice for some people who are presently dealing with a huge sum of debt. It can give you better control of your assets than bankruptcy. Equally, it is a lawful understanding between your leasers and you in which you need to pay a reasonable month to month for a certain period of time.

What is an IVA?

Individual Voluntary Arrangement is mainly a  debt solution plan that will help you to deal with the debt that someone is struggling to repay. It is a form of insolvency but differs from bankruptcy.

However, it should be set up by a qualified and experienced person. As well as to protect your income, IVA is the best to use. In case you are in a profession that will not allow bankruptcy as a reasonable solution to debts, then you might want to keep safe your money.

How Does an IVA Affect Your Life?

By chance, if you have failed to keep promises to your creditors and unable to repay the amount of money in time then they will try to force you to bankruptcy. But with an Individual Voluntary Arrangement, you will be able to make the creditors understand that they will definitely get more money than previous if they give you another chance.

An IVA is flexible and fulfills all your requirements. But in a few instances, it can be costly and there are few risks to consider as well. Let’s take a look at how IVA impacts your life.

Job

If you have an IVA it will not usually affect your job but if you are an accountant or solicitor and have an IVA, then you can’t practice or can practice in a few conditions. In case you have any doubts regarding IVA, then first you have to check the terms and conditions of your contract. Also, check it says if you should continue to work or not.

Possessions

Remember that, the possessions that you use in your home are not afflicted by an IVA. However, if you have any precious jewelry, then you will be able to considered to sell those items and repay the debt.

Assets

Assets including a home, a car, an area of land, etc itself have a significant value. Sometimes selling these assets might help you to repay the debt. In case you think an IVA is reliable for you then the insolvency practitioner will talk about your assets with you. They will guide you whether you should keep them or sell them. 

Credit Rating

Despite the positive effects of IVA, it might create a negative effect on your credit ratings. It reveals lenders that you are unable to manage your assets and money and hence need help.

Also, if IVAs remain on your financial record for more than six years, then it might make difficult for you to apply for loans in the future.

Having an IVA lets your business to continue trading which is not offered by the other debt agreement plans. Additionally, it will allow you to pay off the debts of your company and help you to gain more profit. 

Which Debts You Can Include an IVA?

You may use an IVA in order to pay off a few common debts. Some of them are stated below:

  • Personal loans
  • Overdrafts
  • Council Tax arrears
  • Catalogue debts
  • Mortgage shortfalls
  • Hire purchase debts
  • Credit and store cards
  • The amount of money you owe to HM Revenue and Customs.

Which Debts You Can’t Cover Under an IVA?

There are a few debts that you can cover an IVA. Some of them are listed under.

  • Car finance
  • Students loans
  • Magistrates court files
  • Child support arrears

How Long an IVA Lasts?

Mainly an IVA lasts for sixty months or five years. But no such set length is mentioned in the Insolvency Act 1986. But in some cases, an IVA is extended for more twelve months and allows the applicant to clear the due payments. But in case you have arranged a lump of money you can close the IVA agreement sooner.

Restrictions of an IVA

The IVA applicants should take care of it as it might create a negative impact on your professional and personal life. Learn the restrictions that you might encounter on an IVA.

  • Your credit rating will be afflicted for 6 years from the date you started the agreement.
  • Somehow, you miss a payment, then you have to pay an extended amount to manage the arrears.
  • During the IVA, you are unable to withdraw new debts over £500.
  • In case you are planning to start up a new business during the IVA, then pay an additional contribution to the IVA.
  • At first, you should check your agreement and talk to the HR department before applying for IVA because it might affect your employment.
  • You have to declare any additional assets during the IVA. in that case, you should pay some of the value into your IVA.

Benefits of IVA

As mentioned earlier, IVA helps you from getting bankrupt, that means if you are encountering debt problems, you can apply for IVA. It is a legal agreement that both parties have agreed to. Now, take a look at the advantages that it offers:

  1. It allows you to make a pocket-friendly fixed monthly or yearly payment.
  2. An IVA will only be approved while the creditors and debtors agree on changes.
  3. It helps to avoid property repossessions and as well as bankruptcy proceedings.
  4. The interest charges on your unsecured debt and will be fixed which will make payments easy.
  5. The creditors will not disturb you by calling all the time. As well as they can’t take any legal action against you without any valid reason.

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