An Individual Voluntary Arrangement (IVA) is a legal agreement between you, any creditors with whom you have unsecured debts such as credit cards and loans, and a licensed insolvency practitioner.
With an IVA, you agree to pay a single, reduced, affordable amount each month for a period of 3 to 5 years, after which your creditors will write off any remaining debt. Ultimately, you may be able to write off as much as 90% of your debt by setting up an IVA.
The reason that creditors are normally willing to accept an IVA is that they don’t have to spend time and money pursuing debts that people aren’t able to repay. It takes between 6 and 8 weeks to set up an IVA, and once it is active, all interest charges are frozen and creditors will deal with your insolvency practitioner rather than contacting you directly.
In order to qualify for an IVA, there are a few basic conditions:
- IVAs are only available to individuals, not businesses.
- IVAs are only available to people who owe more than £15,000.
- IVAs are only available to people who are earning a regular income.
- IVAs are only available to people residing in England, Wales or Northern Ireland
If you live in Scotland, you may be eligible for a Trust Deed.
If you owe less than £15,000 but you are struggling to repay your debts, there are other options available to you – find out more about other debt management options.
A common concern with those considering entering a debt management plan is whether or not this will have an impact on the length of time it takes them to repay their debts in full.
A debt management plan is not designed as a means of speeding up your repayment process. It’s designed to make your debts manageable and affordable and as a plan that will enable you to pay off the debts at a realistic pace.
This means it can end up taking you longer to repay the debts than it would without a debt management plan. However, by the same token, it means that you can actually realistically afford the repayments and are therefore more likely to actually be able to repay the debt.
It’s also possible that your total debts could end up being reduced, however, and certainly interest and charges stopped, which is obviously beneficial.
A debt management plan is not something to which you are contracted either. If your circumstances change during the plan (either positively or negatively) simply get in touch with us and let us know. You are not tied into anything.
Debt management plans, for those who have had no experience of them, can be confusing business! And let’s face it, talking about your debts, possible solutions and even finance in general can be difficult. Nobody feels particularly comfortable discussing financial problems.
This is partly why there are so many myths surrounding debt management. One such belief we find consumers often have is that they may not be eligible for debt management unless they own their own home.
Are Non-Homeowners Eligible for Debt Management?
Categorically, yes! Eligibility for a debt management plan is based on your debts, number of creditors and your ability to make repayments. It’s not based whether or not you own your home.
There are other debt solutions out there that might require you to own your own home. An example might be a debt consolidation loan that is secured against your property.
But debt management plans are not secured against your assets and, as such, you don’t have to own a home to apply.
If you’re struggling with debt from multiple creditors and you’re not sure of your options, get in touch with Moneysolve. We can advise you on the most suitable debt solutions based on your personal circumstances and you can be completely sure that your call will be handled in confidence.
An Individual Voluntary Arrangement (IVA) is a government-endorsed solution for people whose monthly debt repayments and living costs exceed their income, allowing them to pay a manageable amount. IVAs are normally chosen by people who are unable to cope with unsecured debts they have taken out, such as personal loans or credit cards.
If you have a mortgage or other secured borrowing such as a debt consolidation loan, the provider has lent you the money on the basis that the value in your property gives them a means of recouping their losses if you stop making repayments. Because mortgages tend to be large sums, providers need a means of offsetting the risk they are taking by lending you the money. Similarly, debt consolidation loans tend to be utilised by those with a poor credit history, so lenders secure the debt to minimise the risk they are exposed to. Therefore, these providers have a legal guarantee which ensures that, in the event you fail to make the agreed payments, they can force you to sell your house in order to repay the loan.
For this reason, it is highly unlikely that these companies would be willing to agree to take reduced payments within the terms of an IVA. Simply put, IVAs are not designed for situations where borrowers are struggling to repay large secured debts.
That doesn’t mean you can’t set up an IVA if you have a mortgage or another secured loan. If you also have various other unsecured debts that you’re having difficulties repaying, we may be able to arrange an IVA that addresses those debts. If you don’t want to lose your home, however, you need to ensure you keep up the monthly repayments on any secured borrowing.
A debt management plan (DMP) is an informal arrangement that isn’t recorded on your credit file in itself. However, if you are considering a DMP, it is likely that you have already encountered problems making repayments on any personal debts you may have. If that’s the case, there will already have been an impact on your credit score.
Whether or not you have signed up to a DMP, if you fail to make the monthly repayments that you agreed with a lender in full, then your credit score will suffer.
If your account is in arrears, a lender can issue a Default Notice, which stays on your credit file for 6 years and will normally have an adverse impact on your credit score.
Ideally, therefore, you should still be making at least the minimum monthly repayments you originally agreed to, even if you are making those payments through a DMP.
As a debt management company, we can negotiate with lenders on your behalf in order to get interest and penalty charges frozen. Ultimately, that means you should be able to get out of debt quicker, and that you will be able to improve your credit score more quickly than you would otherwise have been able to.