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What is Individual Voluntary Arrangement? | How does it Work?

IVA (Individual Voluntary Arrangement) is one type of formal agreement process that generally occurs between you & the person to whom you owe money. Well, this agreement enables you to return the most insignificant percentage of the debt that you owe. 

You may require to pay back a large amount of money based on the debts & that wouldn’t affect you in order to qualify for the IVA process. Usually, Individual Voluntary Arrangement is set by the Insolvency Practitioner & it can be marked as a legally binding settlement process. 

So, with the help of Individual Voluntary Arrangements, you will be able to pay off several common debts such as overdrafts, mortgage shortfalls, personal loans, & many more. 

Well, you should be aware that there are several debts that you can not pay with the help of Individual Voluntary Arrangements such as Car Finance, Child maintenance, Student Loans, & so on. So, today, we are going to share everything you may need to know about Individual Voluntary Arrangement.

Benefits of IVAs 

Well, you can find lots of benefits incorporated with an IVA & those are cited below:

  • Individual Voluntary Arrangement can help you to keep your property and other valuable assets remain unaffected. 
  • By using the IVA, you don’t require to pay any upfront & will subsequently support you to get released from debt. 
  • You can directly apply for IVA online and once applied, the creditors aren’t allowed to call you. They can’t even email or text you as well. 
  • You need to be aware of the fact that during the time of the IVA register, the interest charges are preserved. 
  • This settlement process gives you 100% protection from debt collectors. So, you can even stay secured from bailiffs. 

Know About IVA and How it Works? 

When you find it for the very first time, it may look pretty complicated but when you get to know about IVA,  it will become simpler. 

  • IVA Calculator: It helps you to check whether you’re qualified for this settlement process or not. 
  • Credit Check: It’ll not pose any impact on the credit score & you can’t classify it as an application. So, after running the credit check, you’ll find the list of all your debts. And in the case of the credit check, you can find some debts & generally, they aren’t displayed. Therefore, you need to add them manually! 
  • Income and Expenditure: There will be a person who will check through your expenditure & income. He will check where you’re spending money most & the reasons behind your spending. Henceforth, they’ll help you to be aware of whether you’re solvent or not. 
  • Allowances: For your regular expenses, you require permission from your debt advisor since they allot the allowances for you. Well, the allowances include shopping, mobile phone, entertainment, and many other things. Here, you need to be aware of the fact that they allot this allowance towards future spending. 
  • IVA Proposal: Usually, this proposal can be applicable to who owes money. So, this is one kind of formal settlement process. In this proposal, you need to make payment on a regular basis towards the debt for 5 years. And in return, you need to pay a significant amount of debt to the Insolvency Practitioner. 
  • Acceptance: Once the creditors accept the payment proposal, be sure to pay 60 monthly payments unless it gets complete. 
  • Debt Free: You must know that you’ll be completely free at the end of the IVA. 

Criteria to Qualify for an IVA

Before you apply for an IVA, you must note all the major to minor criteria. The people who have a consistent source of income can be most appropriate for an IVA. People may need to pay a lump sum amount towards their debt however this situation will not affect you to qualify for an IVA. 

What is the Debt Amount in an IVA? 

You must know that all debts can’t be incorporated in an IVA. The debts which can be incorporated are credit cards, overdrafts, gas and electric arrears, payday loans, & many as such. 

You may have a student loan however you can’t pay that through this settlement process. There are lots of IVA debts that you need to pay separately like secured loans, mortgages, etc. 

Minimum payment in Individual Voluntary Agreement

IVA has not set any minimum payment. However, be sure that you’re proficient in paying a reasonable amount each month. But if you don’t have the capacity to afford that, then your creditors will not accept the IVA proposal. So, if you’re in this state right now, then the debt relief order can be the most reliable option for you. 

How long does an IVA Stays? 

You are required to bear in mind that an IVA stays for 5 to 6 years but you will be able to extend it for another 12 months too! And at that time, you need to make the agreed payments. In fact, there is a possibility that you may be unable to repay a huge amount within a specific time frame. 

If such kinds of situations appear where you are not able to pay the agreed amount within 6 months, then your IP or insolvency practitioner will work in your favor. And at that time, your creditors may extend the repayment arrangements. 

Restrictions you might Find on an IVA

Be sure to handle the Individual Voluntary Agreement. Otherwise, you may face major to minor consequences on your professional, personal, & financial life. 

  • You must be aware of the fact that your credit score can get affected for the next 5 to 6 years as the initiation of the settlement process. 
  • For the whole term of your IVA, be sure to keep a budget agreed with your IP. 
  • If you receive any lump sum amount or any additional assets, make sure you declare that to your IP during the IVA. You may need to pay an extra amount based on that.  
  • It can be possible that you might earn an extra income or an additional bonus during the IVA. You may need to pay a specific amount in addition to your IVA as the genetic contribution. 
  • During the IVA settlement process, you are not able to take out new debts above 500 pounds. 

IVA Can Affect Your Home 

During the IVA settlement process, you are not able to sell your residence. 6 months before the end of your settlement process, you will be able to remortgage your property like your house & it depends on the value of your house. 

Well, if you’re intending to re-mortgage, then you can’t enhance the mortgage by more than 90% of your home’s valuation. And while you’re on the IVA, you’ll find it pretty difficult to purchase a property. Each and every detail about remortgaging & mortgaging can be obtained from the IP or Insolvency Practitioner. 

What You Can Face When You Miss Payments During IVA? 

Over time, you may be not able to make a payment during Individual Voluntary Arrangement. And when such kinds of situations appear, be sure to consult them with your IP. 

And in case of an emergency situation, IVA may also allow availing a short payment break. 

When you require a longer payment break, then your IP will inform your creditors about the whole scenario. But, in case, they don’t agree to do so, then you are not able to take a longer payment break. And due to any uncertain situation, you miss any monthly payment, it will be directly combined towards the end. 

IVA Can Affect the Credit Report

When you are involved in an IVA, this settlement process will appear on your credit file for 5 to 6 years & it begins from that time when the settlement is approved. 

  • At times, the IVA may get accomplished a bit early but it will still show on the credit report for 6 years. 
  • Your IVA might take more than 6 years & which will show on your credit report. And when you have completed the IVA, this will be considered as fixed. 

Here, you need to be aware of the fact that your creditor can also mark Default on your credit report if you do not make all the monthly payments. And this default implies that the original settlement has been broken. And you will find this on your credit report for 6 years. 

What Happens to Your Assets During IVA? 

Over time, assets aren’t included in the IVA. And when you are into an Individual voluntary arrangement, your Insolvency Practitioner or IP will deal with all your properties and assets. Many assets such as houses, cars, shares, precious jewelry, & many others may belong to you. Therefore, all the IVAs aren’t the same and in the majority of the cases, you can keep your jewelry, home, vehicle, & even your mobile. 

Jobs that can be Affected Because of Individual Voluntary Arrangement

Jobs can get influenced when you enter into the Individual Voluntary Arrangement. Some of the jobs that may be affected are Property, Law, Accountancy, & Finance.

At times, you may not be certain whether you will be able to keep your job or not during IVA. Therefore, go through the below-mentioned points in order to get to the details:

  • At that time, you are required to check the documents of your employment & all details. 
  • You need to be sure that you discuss this with your IP to determine whether you can keep your job or not. 
  • You can get in touch with your trade union & can even consult the HR department. 

How to Set Up an IVA? 

Well, if you desire to set up an IVA, then you require to get in touch with your Insolvency Practitioner or IP & you need to pay the requisite charges. Usually, these charges are involved in your regular payments. But, before setting up an Individual Voluntary Arrangement, you shouldn’t pay any up-front fees. 

Details to Set Up an Individual Voluntary Arrangement

Before taking an Individual Voluntary Arrangement, be sure to discuss the entire scenario with an expert debt adviser. They can assist you to make the correct decision. There are certain factors regarding which a debt advisor can prove to be the ultimate guide, like: 

  • They’ll listen to all your questions & have the capacity to deal with each situation confidently. Therefore, providing you with advisable approaches to handle your money. 
  • Debt Advisor will not judge you & give ways to deal with each debt situation. 
  • They’ll listen to your issues & will check whether you’re able to claim all the benefits or not. 

An open conversation with a skilled & experienced debt adviser will support you to control your debts. A debt advisor will assist you in order to find the most convenient approach to clear your debts. 

Certain people face debt-oriented problems & based on their basic issues, you can easily check out your present scenario. Their cards may be overused & no one desires to lend money. 

In order to find the most feasible way, you must talk to the IVA advisor. You can get in touch with them online, or over the phone. However, face to face is the most convenient approach that you can select. 

Your Responsibility 

If you do not keep up with your repayments, then your IVA might get canceled. Because of the Insolvency Practitioner, you can get bankrupt. So, make sure to make payments on the prescribed time and before the due date. 

Ending Notes

This comes to the end of the “What is Individual Voluntary Arrangement? | How does it Work?”. Thanks for reading our blog. If you want more information regarding “How to choose IVA smartly” or “How to apply IVA online UK”, let us know in the comment section below! You can also give us a ring or send us an e-mail at our official mail ID. We would be happy to help you back!

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