An IVA is a formal agreement between you and your creditors to pay back your debts over a period of time. IVA’s are set up by an insolvency practitioner who will deal with the creditors throughout the process.
IVA’s normally last for a period of 5 years and your insolvency practitioner will work out a repayment plan over the life of the IVA and the practitioner will normally be paid directly by you and then distribute the money to the creditors.
Most debts can be included in an IVA however, they are normally used for the following types of debt:
- Bank / Building society loans and overdrafts
- Credit cards
- Personal loans
- Store cards
- Charge Cards
Unlike a debt management plan, an IVA can also include priority debts such as:
- Tax debts
- Electricity and Gas bills
However, you cannot include debts such as:
- Magistrate court fines
- Student Loans
- Child support arrears
- Maintenance arrears ordered by the court
Secured loans (debts secured against your home) can also be included in an IVA, but a creditor must give their permission for this. There is no minimum or maximum amount which can be included in an IVA, but all creditors must agree to the arrangement and there must normally be more than 3 debts with 2 different creditors.
An IVA is a form of insolvency, but it is different from bankruptcy. It is a formal, legal debt solution approved by the court which the creditors must stick to.
At the end of the IVA (normally lasting 5 or 6 years) you will no longer have to pay your creditors for the debts, the record of the IVA will be removed from the insolvency register and your insolvency practitioner will provide you with a completion certificate.
Income and Assets required for an IVA
To get an IVA approved you normally need to have some spare income to pay the creditors. This value can vary but it must usually be a minimum of £100. IVA’s can be flexible depending on your needs and circumstances so if you don’t have much spare from your monthly income and have something to sell to raise a lump sum, you may be able to pay creditors with the lump sum.
IVA’s are normally only correct if you have regular and predictable income as the IVA depends on you making monthly payments to creditors over a period of several years therefore, if your income varies from month to month, an IVA may not be right for your circumstances.
If you own a home, most agreements include a requirement that you get a valuation of your home in the final year. If there is equity in the property, you’ll need to raise a lump sum to put into the IVA by re-mortgaging your home. Equity is the amount you’d make from the sale of a property after any mortgage and secured debts are paid off, but you shouldn’t have to sell your home to raise the lump sum. If you can’t re-mortgage, you’ll simply continue to pay the normal monthly contributions under the IVA for 12 months instead.
Assets are things you own which have a significant value such as a home, land or a car. You don’t have to have any assets to get an IVA but hey may help you pay your debts. Assets can be used to pay creditors once they are sold and they can be included in the IVA.
Before embarking on any debt solution, it is important you understand all the benefits and pitfalls of each. Get Help with Debt’s experts will ensure you’re provided with all the information you need to make the right decision for your circumstances. Fill in our call back form, take our free assessment or call us on 02890 393 626 and begin the process of getting free from unmanageable debt today.