Linda owed her creditors £30,000, the repayment on this debt was £500 per month. Linda could only afford £100 per month so she paid the minimal amount and the debt kept growing through interest.
Linda entered an IVA paying £100 per month for 5 years, she paid a total of £6,000. Creditors accepted this in lieu of the £30,000 they were owed.
Creditors were paid 13 pence in the pound after fees. The unpaid debt (over £25,000) was written off. Linda was then legally free of her debt.
Individual Voluntary Arrangement (IVA)
IVA’s are contracts between people and their creditors (people and companies they owe money to). They are set up by Insolvency Practitioners. Normally they involve a person in debt repaying a lesser amount to their creditors and in so doing, clearing their debt.
How Long Do They Last?
In an IVA, payments are normally made over a 60 month period, but in some circumstances, this can be extended. Often an element of the debt is written off. The size of this debt write off can in some cases be significant. Your payment is worked out on your income less reasonable everyday expenses. The amount left over is what you CAN afford to pay, NOT what creditors are asking for as a monthly payment.
Will They Stop Bailiffs & Debt Collectors?
Once in the IVA you are protected against your creditors charging further interest and taking court action. Your creditors are NOT allowed to chase you for their debts BY LAW after the agreement has been set up. The only people who can contact you regarding your debts is your IVA company.
If you fail to meet your payments then the IVA will fail. If the IVA fails then the situation reverts back to as if the IVA were never put in place – creditors can continue to chase you for their debts. If however you do everything the IVA stated – normally pay an amount of money to your creditors over a 5 year period, then the IVA will successfully complete. In which case your unpaid debts are legally written off and you will be debt free.
Can I Get Out Early?
IVA’s can end early with the introduction of a lump sum payment. Creditors tend to support early settlements as they prefer to receive their money early rather than waiting for payments over a five year period. Call us for more information.
Advantages of an IVA
- One affordable payment per month
- Creditors are bound by law and cannot chase their debts
- From the date of approval, all interest and charges are frozen
- This is a private agreement between you and your creditors – it is not advertised
- Your employer will not be made aware
- You can still re-mortgage your home when in an IVA
- You and your partner can enter a joint IVA if some debts are in joint names
- Fees are taken from the monthly payment – there is not an additional payment to make
- We have the experience and systems in place to make the process as painless as possible for you
- We are not a call centre. You will have one point of contact “pre” and “post” the IVA
- If, for whatever reason, your IVA is not accepted, there will be NO CHARGE at all. We only take you on if you have a very good chance of being accepted
Disadvantages of an IVA
- Your credit rating will be adversely affected by an IVA
- All assets must be declared (that includes savings and any equity in properties at home and abroad)
- It may impact on your job (depending on what you do)
- You may be asked to release equity on your property
- It is often a 5 year programme