If you’ve been considering an IVA as a debt solution to help you towards becoming financially free, you’ve probably been wondering what to expect when it comes to IVA payments.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors. It is a solution that allows a person to only repay a percentage of their unsecured debt to their creditors in affordable monthly payments, usually over a fixed term of five or six years. You can also propose an IVA with a lump sum instead of monthly payments. Once your creditors approve your IVA, interest and charges will be frozen and the creditors can take no further action concerning your debt. When you complete the IVA, you will receive a certificate of completion, and the remaining debt is written off.
An IVA is a formal debt solution. It is a statutory contract set up by Debt Movement between you and your creditors. This means that you can finally relax in the knowledge that, as long as you make your single, affordable, monthly repayment, your creditors cannot contact you or take action against you for your outstanding debt.
You can find out more about IVAs and how they work here.
What will my IVA payments be?
The main thing to remember when you are thinking of entering into an IVA is that your payments will always be worked out so that you can afford to pay them. Your household income and expenditure will be taken into consideration and your monthly payment will be the amount that is leftover at the end of each month.
Your insolvency practitioner will request a breakdown of all of your income and expenditure. It is vital that you are honest with this and that you include everything. Your insolvency practitioner will take this information and create a proposal to send to your creditors. Creditors have set out certain expenditure guidelines and you will be asked for proof of certain expenditure if it is deemed to be unusually high. If you don’t provide this, your creditors may decline your proposal.
So, for example, if your monthly household income is £2,000 and your monthly expenditure is £1,900 – your IVA repayments will be £100 per month. Your insolvency practitioner will go over your calculations with you to make sure that you haven’t missed anything or miscalculated something.
How much does an IVA cost?
Although there is no initial payment for setting up an IVA, every company has fees for handling your IVA. At Debt Movement our fees follow the industry standard. We are always upfront and honest about the fees charged and will make them very clear from the outset. Because it is your creditors who approve our fees, even though we always ask for the same amount, they may vary from case to case but will be included in your monthly payment so you don’t need to worry about making extra fee payments. Your exact fees will be included in your IVA proposal.
The costs involved in an IVA are:
- A nominee fee
- A supervisor fee
Is an IVA worth it?
Although an IVA will impact your credit file for 6 years and make it difficult to obtain credit in that time, it has less of an impact on your life in terms of potentially losing your home and assets than bankruptcy. Also, as a legally binding agreement, it will stop creditors from chasing you for payment and set you on the right track towards financial freedom.
The benefits of an IVA include;
- An IVA will stop further interest rates and charges from being added to the amount already owed and leading you further into debt
- The number of monthly repayments is usually fixed at 60 or 72 payments
- Debt Movement’s licensed Insolvency Practitioner will supervise your IVA
- An IVA is a legally binding agreement and will mean the end of contact for payment from creditors
Some points to consider before applying for an IVA:
- If you are a homeowner and have equity of more than £5,000 in the property, you may be asked to remortgage your home in the final year of your IVA to release the equity to pay your creditors.
- Debt Movement’s insolvency practitioner will help you prepare your IVA proposal. This proposal must be approved by creditors that amount to 75% of the debt value of those that vote. This means that if just one creditor declines but they hold over 25% of the voting debt value, your IVA proposal could be declined.
- Every year throughout your IVA, your income and expenditure will be reviewed. If this review shows that your financial circumstances have improved then your monthly payments will increase.
If you are struggling with debt problems and your financial situation is not set to improve soon or you are being chased by creditors, debt collection agencies or bailiffs an IVA could be the right debt solution for you.