An IVA is a genuine alternative to bankruptcy and when used efficiently can be a great way to solve financial issues.
What’s an IVA?
An Individual Voluntary Agreement (IVA) is designed as an alternative for people who would otherwise have no choice but to file for bankruptcy. Since IVA debt management was introduced in 1986 as part of the Insolvency Act, they have become a widely used solution for people to solve their debt problems.
Many believe IVAs to be too good to be true, but this debt management solution has helped thousands of people become debt-free.
One easy lower Payment
Only pay back what you can afford
Unaffordable debts written off
Creditor Protection after approval of IVA
Debt free in 60 months in most cases
Interest and Charges frozen after approval of IVA.
IVA - Disadvantages
Only unsecured debts included in the IVA can be written off at the end of the period and any unsecured debts not included may remain outstanding.
The debtors or creditors will need to approve the IVA for the IVA solution to proceed. Therefore the IVA is not guaranteed and could be declined.
Expenditure restrictions will apply for anyone entering an IVA, therefore non essential luxury expenses may need to be reviewed.
While an IVA solution will generally not require you to sell your home, you may be expected to remortgage to release equity in the final year of the IVA. Due to
your credit score, this may attract a higher interest rate or if you are unable to remortgage, the IVA may simply be extended by a further 12 months.
Although it is very rare, If the IVA agreement does fails without a good reason, there is a risk of Bankruptcy.
Your credit rating will be affected after entering into an IVA.
IVA - FeesThere are two fees associated with an IVA, the Nominee fee and the Supervisor fee. Below is an explanation of these fees and how they are charged.
This is the fee incurred by the IP (Insolvency Practitioner) in drafting your IVA proposal and getting this approved at the creditor's meeting. The nominee fees are
paid out of the proceeds of the arrangement.
Once your IVA has been approved by creditors, your Nominee becomes your supervisor who will be responsible for monitoring and supervising your IVA for
its duration. The fees that are chargeable for this are usually expressed as a proportion of what is recovered for your creditors in the IVA – generally 15% of
realisations. (In other words 15% of the total payments you make in your IVA)
Finally there are expenses to pay in every IVA, these include insurances to protect any money paid into your IVA, software licence fees and a registration fee to register the IVA with the Insolvency Service. Please note that all Insolvency fees and expenses are paid out of the proceeds of the arrangement. You would not be required to make any additional payments in respect of Nominee’s, Supervisory or any additional costs. There are no upfront costs and if your IVA is unsuccessful then there are no fees to pay.