Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay a portion of your debts over a fixed period (usually 5 years). An IVA is often seen as a powerful debt solution for individuals who can afford to repay part of their debt but need help managing the repayments. It allows you to consolidate your debts, freeze interest and charges, and, in most cases, write off a portion of the debt after successfully completing the arrangement.

The Benefits of an IVA

1. Fixed End Date: One of the key advantages of an IVA is that it has a fixed end date, typically after 5 years. This gives you a clear path to becoming debt-free, knowing exactly when your financial obligations will be over. This is especially beneficial if you’re looking for an organized way out of debt and need the certainty of a set timeframe.
2. Debt Consolidation: With an IVA, you combine all your unsecured debts into a single monthly payment, which is managed by an insolvency practitioner. This means you no longer need to keep track of multiple payments to various creditors. Instead, you make one affordable payment that is distributed to your creditors, simplifying your finances and reducing stress.
3. Interest and Charges Frozen: When an IVA is in place, interest rates and charges are typically frozen on the debts included in the agreement. This means that your debt will not continue to grow while you’re working toward paying it off, making it easier to focus on clearing the principal balance rather than being overwhelmed by escalating interest.
4. Legal Protection: Once the IVA is agreed upon, your creditors are legally bound to accept the terms. They cannot take further legal action against you, such as court orders or bailiff visits, as long as you stick to the agreed repayment plan. This provides significant relief from creditor pressure, helping you avoid further stress and hardship.
5. Debt Write-Off Potential: After successfully completing your IVA (usually within 5 years), any remaining unsecured debts may be written off. This means you may not have to pay the full amount of your debts, allowing you to achieve a more affordable resolution to your financial difficulties. This can offer a fresh start, particularly if you’re unable to repay your debts in full.
6. Affordable Repayments: IVA repayments are based on your income and expenditure, so the amount you pay each month will be determined by what you can realistically afford. This means your payments are tailored to your individual situation, ensuring they are manageable and you don’t face financial strain while working through the agreement.

Considerations of an IVA

1. Credit Rating Impact: While an IVA is a powerful tool for managing debt, it will have an impact on your credit rating. The IVA will appear on your credit report for 6 years from the start of the agreement, which can make it more difficult to access new credit during that time. However, many people find that this is a reasonable trade-off when weighed against the benefits of getting their debt under control.
2. Restrictions: While in an IVA, you must not take on any new debt without informing your IVA supervisor, and you may be required to report any significant changes in your income or circumstances. These restrictions are in place to ensure that you continue to meet your obligations and work towards your debt resolution.
3. Not Suitable for All Debts: An IVA only covers unsecured debts, such as credit cards, personal loans, and overdrafts. It does not include secured debts (e.g., mortgage or car finance) or certain other liabilities like student loans and court fines.

Flexibility of an IVA
While an IVA has certain formalities, it offers a significant level of flexibility compared to more rigid debt solutions. If your circumstances change during the IVA (for example, a change in income or a change in your financial situation), your IVA provider can negotiate with your creditors to adjust the terms of the arrangement. This flexibility allows you to adapt to life changes without feeling stuck or unable to manage.

Take the First Step Toward Becoming Debt-Free
An Individual Voluntary Arrangement (IVA) offers many benefits, including debt consolidation, interest freeze, legal protection, and the potential for a debt write-off at the end of the term. If you’re struggling with debt and are looking for a structured, formal solution to regain control of your finances, an IVA might be the answer. By working with an expert, you can gain clarity on your options and find the best path to financial freedom.

Contact us now to assess your options and see whether an IVA could help you become debt free.