Individual Voluntary Arrangement Plan
Sometimes in life we find ourselves slipping behind on payments to creditors. This is even truer in the current economic climate with the cost of food and living rising dramatically. If your debts exceed £15,000, you may be eligible to set up an Individual Voluntary Arrangement plan, giving you more freedom from debt.
An Individual Voluntary Arrangement (commonly known as an IVA) is a legally binding contract set up between you and your creditors, giving you the ability to draw up an affordable monthly sum of money to offer your creditors in a single payment. These plans save you from the constant bombardment of phone calls and letters from people chasing you for money. An IVA plan is put in place and paid off over (usually) five years, after the five year term has ended your unsecured debt is automatically written off, possibly saving up to 60% of your total debt.
For an IVA plan to be approved, three quarters of your creditors must agree to this form of arrangement. Creditors do tend to look kindly on Individual Voluntary Arrangement plans as they would stand to get some or in some cases all of their money back, other options such as bankruptcy mean they could receive no money at all. All debt solutions require a lot of thought and research before jumping in; IVA plans as with others have both advantages and disadvantages.
Advantages of an Individual Voluntary Arrangement plan
- IVA`s are legally binding contracts; as long as you keep up with repayments you will have no contact with creditors and receive no more threatening letters and phone calls from people owed money.
- Once the term of the IVA plan has ended all of your unsecured debt is written off, regardless of how much is left over.
- You only pay back to creditors a sum affordable by you; licensed professionals will work with you to achieve this figure.
Disadvantages of an Individual Voluntary Arrangement plan
- 75% of your creditors must agree to an Individual Voluntary Arrangement plan for it to be put in place. Creditors can put a block on any arrangement proposal if they decide that the terms and conditions don`t benefit their interests
- An IVA stays on your credit file for the length of the agreement and for 12 months after the plan has ended.
- You must make sure never to fall behind on payments or risk facing a court order from your creditors.
When entering into an Individual Voluntary Arrangement plan it is required that you have debts over £15,000, at least £200 per month available for repayments and a regular income.
Your home is under no threat of repossession with an IVA plan, however if you have any equity or any arises it may be required to be released to pay creditors. Other expensive assets such as cars may have to be sold and replaced for cheaper models.
Choosing the right IVA plan for you can help you cope with debt a lot easier.