An Individual Voluntary Agreement (IVA) isn’t for everyone, many see it as a last resort when all other efforts to resolve financial issues have failed. An IVA is a long-term commitment and can have a negative impact on your credit score for quite some time. This is why it is important to think carefully before entering into an insolvency debt solution such as an IVA. So if you’ve asked the question is an IVA right for me? Read on and get the information you need,
What Is an IVA?
If you are considering entering into an IVA, then it is important to fully understand what it entails. An IVA is a legally binding agreement between you and your creditors. Its purpose is to allow you to pay back some of what you owe in affordable instalments. The benefit for the lender is that they recoup some of the money rather than the account remain unpaid. Once the IVA term has completed, the remaining debt is written off. This usually takes five to six years.
What Are the Benefits of an IVA?
The benefits of an IVA include:
- The monthly payments are calculated based only upon what you can reasonably afford.
- All creditor and/or bailiff action will cease.
- At the end of the IVA term, your remaining debt will be written off.
What Are the Negatives of an IVA?
The negative aspects of an IVA are:
- An IVA will remain on your credit file for six years after the beginning of the term.
- It will be extremely difficult to obtain credit during this time.
- If you are a homeowner, you may be asked to remortgage your property six months before the IVA completion date to release equity to repay your creditors.
- You may have spending restrictions while in your IVA.
What Are the Spending Restrictions of an IVA?
Although the benefits of an IVA may sound tempting to many, the spending restrictions that come with it can often be the thing that makes them think again.
Because your creditors are writing off an element of the debt, they will expect you to live within certain guidelines which have been established to strike a fair balance between your general living costs and the ability to repay them as much as possible.
Your Insolvency Practitioner (IP) will work out your IVA payments based upon your income and expenses. This will be worked out almost down to the penny, leaving you with very little to spare. You will be expected to live on a very tight budget for the entire five years, possibly even six. If your income changes while you are still within your IVA, you must tell your IP, who will amend your IVA payments and budget. Earning more money will not necessarily mean that you will have more money to spare.
IVA spending restrictions mean that your money can only be spent on essential living, and any other purchases must be run past your Insolvency Practitioner. To find out more about the spending restrictions while in an IVA and to get further information, contact Debt Movement today.
Is an IVA Worth It?
Being in debt is a worrying time and can negatively impact your mental health — particularly when dealing with persistent contact from creditors, collection agencies and bailiffs. The stresses of debt can take a toll on your private life as well as the people around you. It is important to look at your situation objectively and make the decision while taking everything into account.
The question of whether an IVA is worth it depends on each person’s individual situation. Many people hear that the remainder of their debt is written off at the end of the IVA term and think that it sounds like a great option. The best things to do is to take a long hard look at your current financial situation. The next step you should take in this situation is to speak to an expert who can assess your finances and help you to decide whether an IVA is the right debt solution for you or whether there may be another more suitable option.
There are debt charities such as The Money Advice Service that can help you to understand your options, or you can call Debt Movement for professional guidance and help with getting started with your IVA.
Why Choose Debt Movement for Your IVA?
We have helped over 35,000 people just like you get on the road to financial freedom. Our friendly, impartial guides will help you to decide whether an IVA is the right solution for you. Get in touch today, and we can help you apply for your IVA and begin your journey to becoming financially free.