An Individual Voluntary Arrangement (IVA) is a significant financial commitment that requires careful consideration, especially in 2023, given the evolving economic landscape at the moment. It is a form of insolvency which is sometimes seen as a last resort when other avenues to address financial problems have been exhausted. This blog will help you determine if an IVA is the right path for you in the current financial climate.
Understanding an IVA
An IVA is a legally binding agreement between you and your creditors, designed to enable you to repay a portion of your debt through affordable monthly installments. For lenders, it means recovering some money instead of the debt remaining unpaid. Typically, an IVA lasts for five to six years, after which the remaining debt is written off.
Pros of an IVA
The benefits of considering an IVA include:
- Affordable Payments: Monthly payments are calculated based on your reasonable affordability.
- Creditor Protection: All creditor and bailiff actions cease, providing relief from persistent collection attempts.
- Debt Write-Off: At the end of the IVA term, the remaining debt is written off, offering a fresh financial start.
Cons of an IVA
As with any solution, there are certain drawbacks to be aware of when contemplating an IVA. These are:
- Credit Impact: An IVA will remain on your credit file for six years after its commencement, making it challenging to obtain credit during this period.
- Property Remortgaging: If you own a home, you may be required to remortgage your property six months before completing the IVA to release equity for creditors.
- Spending Restrictions: Living within a tight budget for the IVA’s duration can be challenging due to strict spending restrictions.
Understanding IVA Spending Restrictions
The spending restrictions accompanying an IVA can be a significant deterrent. Creditors expect you to adhere to specific spending guidelines, balancing your basic living costs with debt repayment. Your Insolvency Practitioner (IP) calculates your IVA payments based on your income and reasonable expenses, leaving little room for discretionary spending. Any changes in your income must be reported to your IP, who will adjust your budget accordingly.
IVA spending restrictions necessitate that your money primarily covers essential living expenses, in line with the Standard Financial Statement. Your IP will review your expenditure in line with the guidelines that have been set which are designed to balance your needs and your creditors’ need for repayment.
Is an IVA Worth Considering?
Being in debt can take a toll on your mental health and personal life. The decision to pursue an IVA hinges on your unique circumstances. While the prospect of debt write-off at the end of the IVA term might seem appealing, a thorough assessment of your current financial situation is essential. Seek guidance from experts who can evaluate your finances and recommend the most suitable debt solution, which may not always be an IVA.
Money Helper can help you explore your options, or you can contact Debt Movement for professional guidance and assistance with your financial journey.
Why Choose Debt Movement for Your IVA in 2023?
Debt Movement has assisted over 35,000 individuals in achieving financial freedom. Our impartial experts can help you determine if an IVA aligns with your financial goals and guide you through the application process. Contact us today to begin your path to financial stability and freedom.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
