Are you wondering if an IVA is right for you? An IVA is a formal debt solution that requires a statutory agreement between you and your creditors. Because your creditors must agree to it, your credit rating is affected, so only large debts are appropriate for an IVA. However, if you’re in dire need of financial help, an IVA could be the right solution for you. Here’s a brief overview of what an IVA is, how it works, and what it means for you.
IVAs are a formal debt solution
An IVA is a debt solution where the debtor agrees to make monthly repayments to a group of creditors. This group is made up of creditors who owe the debtor more than 75% of the total debt amount. An IVA will only be successful if 75% of the creditors voting in favour of it agree to the terms of the arrangement. During the process, creditors may haggle with each other over the terms of the agreement, such as requesting more money, including assets and paying over a longer period of time.
An IVA takes about three months to complete. During this time, creditors won’t contact you for a certain period of time. However, the changes in contact details may be made after the IVA is complete, so it’s important to leave sufficient time for the creditor administration departments to update their records. If your IVA fails, creditors may pursue legal action against you. An IVA may result in your name being removed from the insolvency register after six years, so it’s important to allow enough time for the process to be completed.
They are a statutory contract between you and your creditors
An Individual Voluntary Arrangement is a monetary arrangement between you and your creditors. You can pay back part of the debt each month for a fixed period of time. You can also opt to pay a lump sum instead of monthly payments. Your creditors will stop taking any further action against you once you have completed the arrangement. An IVA ends with a certificate of completion. The remainder of your debt will be written off.
IVAs can also affect your employment status. Some people have to change jobs to get an IVA. This is because their employer can use their account to automatically take money out of it to pay debts. But the bank can only do this if you are linked to them. Therefore, it is important to check your contract of employment before you enter into an IVA. You should also check your employment contract as you may be prevented from getting credit if you are in an IVA.
They affect your credit score
There are some important points to note about how IVAs affect your credit report. First of all, it is important to know that your IVA is not recorded on the credit reports of other people who live in your home. The details of other people may appear on your credit report because you may not be aware of it, but a creditor may link your names and use them to inform your partner of your financial situation. However, this won’t affect your score negatively.
Second, if you have an IVA on your credit report, you should be aware that the lender will do a hard credit check every time you apply for credit. Applying for credit too frequently will also harm your credit score. In the long run, it may be better to wait for several years before applying for new credit. You may also want to consider clearing your IVA within a shorter time span. It will help your credit score if you don’t apply for any loans or credit cards for at least three years.
They are only suitable for people with larger debts
Many high earners, professionals, and those in jobs where bankruptcy is not an option, prefer the IVA. However, there are several downsides of this method, which include a lack of flexibility and a tendency to be mis-sold. Debt Camel recommends an IVA for people with debts of twenty thousand pounds or more, and regular income. If you have assets or do not earn enough to qualify for an IVA, you may be better off considering other options.
If you have a bad credit score, you may struggle to find a loan that fits within the terms of an IVA. If you need a new loan to pay off your debts, it’s important to talk to your IP and get advice. Otherwise, you may put your house at risk. It could even make you bankrupt and lose your home. However, many people have no other choice than to apply for an IVA to save their homes.