Are you struggling with debt and wondering how to manage it? An Individual Voluntary Arrangement, or IVA, might be the solution you are looking for. In this article, we will explore what an IVA agreement is, how it works, and its benefits and drawbacks.
What is an IVA Agreement?
An IVA is a legal agreement between you and your creditors to repay your debts over a set period, usually five or six years. It is a form of insolvency, which means that it is intended for people who cannot pay their debts as they fall due.
An IVA agreement is a flexible tool that allows you to make affordable monthly payments based on what you can afford. It can be used to repay different types of unsecured debts, such as credit cards, personal loans, and payday loans.
How Does an IVA Agreement Work?
To start an IVA, you need to work with an insolvency practitioner (IP), who will assess your financial situation and help you create a proposal that outlines your repayment plan. The proposal must be approved by your creditors, who will vote on it.
If the proposal is approved, you will be required to make regular monthly payments to your IP, who will distribute the funds to your creditors in accordance with the agreement. Once you have made all the payments, any remaining debts will be written off.
Benefits of an IVA Agreement
One of the main benefits of an IVA is that it can help you avoid bankruptcy, which can have severe consequences, including losing your assets and damaging your credit score. An IVA can also freeze your interest and charges, which can help you pay off your debts faster.
Another advantage of an IVA is that it is a legally binding agreement, which means that your creditors cannot take legal action against you or chase you for debts included in the IVA.
Drawbacks of an IVA Agreement
One of the drawbacks of an IVA is that it can be expensive. You will have to pay a fee to your IP for their services, as well as other costs related to setting up the IVA.
Another downside of an IVA is that it can impact your credit score. While it may be better than bankruptcy, an IVA will be noted on your credit report for six years, which can make it harder for you to obtain credit in the future.
Conclusion
Overall, an IVA agreement can be an effective way to manage your debts and avoid the consequences of bankruptcy. However, it is essential to carefully consider the costs and impacts of an IVA before deciding to go ahead with it. If you are struggling with debt, it is best to seek professional advice from an IP or a debt advice charity to find the best solution for your situation.