An Individual Voluntary Arrangement (IVA) is essentially a formal agreement between you and your creditors, the people to whom you owe money, to pay all or part of the debts you have with them. These arrangements have to be set up professionally by an authorised Insolvency Practitioner (IP) and as such there are professional fees that will have to be paid to enter into an IVA. An IVA will generally last for a five year period during which you will be expected to pay everything you can afford outside of agreed ‘reasonable’ living costs.
If you are considering an IVA as a way of helping you reduce the pressure on your finances you should understand exactly what is involved before you start.
What are the benefits of an IVA?
- You only have to make a single affordable payment each month
- All interest and credit charges on your existing debts will stop
- All your creditors, even those who don’t agree with it, are bound by the terms of the agreement
- Creditors cannot take any further action against you
- Your outgoings are fixed for a sensible duration (usually five years)
- When the IVA is finished the balance of what you owe your creditors is written off forever.
What are the risks of an IVA?
- Your IVA is entered into a public register which means that credit reference agencies will be able to see it. This will affect your ability to open a new bank account or obtain a loan as your credit rating will be impaired.
- Some firms will require you to pay upfront fees to your Insolvency Practitioner to arrange the IVA, although at Knightsbridge Insolvency, which is part of the Money Advice Group, we don’t charge any upfront fees.
- If you have equity in your home you will generally be required to release all or part of this in the fourth year of the arrangement as part of the settlement to your creditors.
- If your IVA fails, or you fail to maintain the payments into an IVA, your creditors can take further action against you and you may be made bankrupt.
- There are also restrictions on what expenditure is usually permitted when you are on an IVA. For example creditors will not usually accept extravagant expenditure or anything that could be seen as an unnecessary luxury such as gym membership. There may be individual reasons for such expenditure such as health problems however these are considered on a case by case basis.
To find out more, simply call us today on our free phone number 08002 800 492 or fill in the Contact Money Advice Group form on this page and we’ll call you back. Alternatively, please visit Knightsbridge Insolvency Services’ IVA Page
Money Advice Group is the parent company of Knightsbridge Insolvency Services (Knightsbridge). Knightsbridge is the service provider of Individual Voluntary Arrangements (IVAs) and will be the company responsible for administering the IVA. Knightsbridge is a wholly owned subsidiary of Money Advice Group. Details of Knightsbridge’s IVA fees can be found here.