What is an Individual Voluntary Arrangement (IVA) – How it works?

The IVA was a government initiative that was created with the express purpose of reducing foreclosures and preventing borrowers with a high level of unsecured borrowing in bankruptcy. An IVA is an agreement with your creditors to pay off your debts over a defined period of time. This is an option that you can use to pay off your debts. It is a formal and legal solution of the debt. This means that it is approved by the court and that your creditors must stick to it.

How does the individual voluntary arrangement work?

An Individual Voluntary Arrangement (IVA) freezes your debts and allows you to repay them over a period of time.

Any money you still owe after this period is then written off.

You can apply for an IVA if you can afford to pay something for your debts but not necessarily the total amount that your creditors want.

You will need to demonstrate that you have a regular income over the long term because repayments will generally cover a period of more than 60 or 72 months (five to six years).

If you have a lump sum to pay on your debts, you may also be eligible for an IVA.

The IVA is set up by a qualified professional, an insolvency practitioner, who will work with you to develop a proposal to submit to your creditors for approval.

It all depends on your situation and your willingness to accept the plan.

An IVA is a legally binding agreement between you and the people to whom you owe money.

This means that once you have signed it, neither you nor your creditors can withdraw. So, you have to make sure that it suits you.

What debts can you repay with an IVA?

You can use an IVA to pay off many current debts, including:

·        Over drafts

·        Personal loans

·        Debt Catalog

·        Tax arrears of the Council

·        Rental purchase debts

·        Mortgage Deficits

·        Store cards

·        Money you owe to the UK tax authorities, such as income tax or national insurance contributions

What debts cannot you pay with an IVA?

You cannot use an IVA to pay:

·        Student loans

·        Court of First Instance fine

·        Some types of auto financing

·        Child support or arrears

Arrears of rent and mortgage

Technically, you are allowed to include arrears of rent and mortgages and other secured loans on your property in an IVA. However, your creditors must accept this and they often do not. Check with a debt counselor what you can and cannot include in an IVA.

How to set up an IVA?

You must set up an IVA through an insolvency practitioner. Fees to be paid to the insolvency professional are usually deducted from your monthly payments. You should not have to pay any upfront fees before setting up your IVA.

Free advice on setting up an Individual Voluntary Agreement (IVA)

It is always best to talk with an experienced debt adviser before deciding to take out an IVA. Indeed, the debt solution that suits you best depends on your personal situation and may not be this one.

Debt advisers can help you make the right decisions so that most of your money is used to pay your debts.

A debt adviser will:

• ·        treat everything you say with confidence
• ·        give advice on better ways to manage your money
• ·        never judge yourself or make you feel bad about your situation
• ·        suggest ways to deal with debts that you may not know
• ·        always be happy to talk to you, whether your problem is big or small
• ·        Verify that you have applied for all the benefits and rights offered to you.

You may only need a conversation with an experienced debt adviser to make sure your debt management or debt cancellation plan is right for you. If you need more help or if you do not know where to start, you are not alone.

Nearly half of those in debt told us they were unsure of the best way to pay off their debts, and this is where a debt counselor can really help you.

More than eight out of ten people who have been warned of being in debt tell us that they feel less stressed or anxious and have better control over their lives.

People who leave a debt problem often find problems have:

• ·        Spiral out of control
• ·        Their cards are at most
• ·        No one else is lending them
• ·        It takes a lot more time to pay back what they owe.

Debt advice is free and confidential and you can contact an adviser in the way that suits you best - online, by phone or face to face.

So join one of the hundreds of thousands of people we help each year and take the first step to free you from debt.