You might have heard about IVAs, but have you ever wondered how they actually work? What do you need to know before applying for one? You can take temporary payment breaks and have missed months added to the end of your IVA. An IVA is an affordable option that requires no upfront costs and only a low monthly payment. It is also possible to apply for an IVA online. Once you have decided to apply for an IVA, you must make sure to prepare your finances beforehand. Fortunately, you can submit your application digitally, which means there are no paper copies of documents.
Unsecured debts are not covered by an IVA
An IVA does not cover certain types of unsecured debt. These are credit cards, bank loans, overdrafts, and store cards. However, it does include debts secured against an asset, such as a mortgage. Other forms of unsecured debt are personal loans, leases, and hire purchase agreements for cars. However, IVAs are not suitable for debts under PS10,000.
The most common types of unsecured debts are unpaid income tax and benefits, unpaid utility bills from previous addresses, and mobile phone contracts that you no longer use. Unsecured debts are a significant part of your overall debt, so if you have unsecured loans, it will not be covered by an IVA. However, you can choose to pay off your unsecured debts in a different way if you wish.
In an IVA, the debtor chooses which creditors he wants to include in the arrangement. If the creditor doesn’t agree, he or she will be entitled to take legal action against you, which is an unnecessary expense. Nevertheless, most debtors choose to include all of their unsecured creditors in their agreement to avoid the hassle of being sued by creditor. These debts can be very stressful for both the debtor and the creditor.
IVA payments take into account monthly income
Your IVA payments are calculated by calculating your monthly income and living costs. To determine the amount of your monthly living budget, IVA firms will use allowances from industry standards for things like food, clothing and travel. These allowances will allow you to calculate the maximum monthly payment you can afford while still covering your necessary expenses. Once the calculation is complete, you can agree on a monthly payment amount with your IVA company.
IVA providers will charge a fee for setting up and supervising your IVA. These fees are typically PS4,000 or more, and are taken out of your monthly income. The fees are effectively paid to the creditors, so you should expect to pay a smaller amount than you owe. However, you may be able to repay the fees if you have a windfall during your IVA. A windfall during your IVA could help you repay your debts. Alternatively, you could fail to make the monthly payments and recover nothing from the IVA fees.
IVA payments may be raised or lowered if you increase or decrease rent charges
If you have an IVA, you should consider the effects of increasing or reducing your rent charges on your monthly IVA payments. Rent arrears from your previous property will be considered unsecured debt, so you must consider how to make your new IVA payments. If you are planning to increase your rent charges in the future, you should seek advice from your IP. They can authorise a payment break to allow you to make your payments as normal.
It can be tricky to find accommodation if you’re in an IVA. If you have a poor credit rating, you may have already had issues in the past with your debts. However, your IVA will also have a negative effect on it. Most letting agents will carry out a credit check as part of your rental application process. As such, it’s important to ensure that your landlord’s policy allows you to have a home even while you’re on an IVA.
IVA termination may result in unpaid debts
If you have entered into an IVA, you should always remember that the IVA will not work if your payments do not keep pace with the monthly repayment schedule. Once the IVA ends, your creditors will resume charging interest on your debts and may even file for bankruptcy if they cannot collect what you owe. In order to keep your IVA going, you must cooperate with the supervisor. You must provide all required information to your supervisor and keep up with all agreed payments. At least annually, your IVA Supervisor will review your income and expenditure.
When the IVA is terminated, creditors can pursue you for any unpaid debts. Creditors and IP can take weeks or months to respond and may lose the IVA fee you paid. It’s essential to keep in mind that the payment plan you entered with your IP will end if you do not meet the repayment terms. If you do not keep to your agreement, you risk losing your job.