If you have racked up debts then you might be looking at ways to become debt free. One of those ways is to enter into an IVA, and in this post I am going to let you know what you need to know about an IVA.
What is an IVA?
An IVA stands for Individual Voluntary Arrangement and it is a formal arrangement made between you and your creditors.
This agreement allows you to repay your debts at an affordable rate, over a fixed period of time. After this time, which is usually 5 or 6 years, your remaining debts are written off.
Who can apply for an IVA?
An IVA is suitable for a lot of people, especially those who can afford to pay off some of their debt with smaller, affordably monthly repayments.
You will need to have a regular income that doesn't fluctuate too much. You need to make regular payments, so if you income dips and you cannot keep on top of your regular payments then an IVA might not be for you.
Which debts can and cannot be included in an IVA?
An IVA can be used across a number of debts, including:
- Council tax arrears
- Tax debts
- Credit cards
- Store cards
- Charge cards
Debts like mortgages are secured against your home, so if you can't pay then your home become repossessed. You can sometimes include your mortgage and other secured debts, but they aren't likely to be included in your IVA.
There are some debts that you cannot include in an IVA:
- maintenance arrears that have been ordered by a court
- child support arrears
- student loans
There is no minimum or maximum debt you need to have to apply for an IVA.
What else should you know before considering an IVA?
Choosing the IVA repayment route will have some impacts on your life.
You will need to do a budget so that you can work out what your spending habits are like, and how much you can afford to repay. Your budget might also flag up extra areas for cutting back, such as getting rid of your tv subscriptions and meal planning.
You also need to consider other important things.
An IVA may affect your job, depending on the work that you do. For example, if you are an accountant.
If you own your own home then you might have to consider re-mortgaging it.
In some instances, your savings could be used to pay your creditors.
And most importantly, if your circumstances change and you cannot keep up with your repayments then your IVA may fail. This could result in bankruptcy.
How to apply for an IVA
As you can see, there is a lot to consider before you get an IVA.
If you think an IVA might be right for you then the next step would be to get IVA help and advice.