IVAs – clearing your unmanageable debt

If you are struggling with an unmanageable level debt that you don’t think you’ll ever be able to repay, an IVA (Individual Voluntary Arrangement) may be appropriate for you.

An IVA is basically a formal agreement between you and your individual creditors designed to help you clear your debts in (in most cases) five years. An IVA may be suitable for you if you don’t think you’ll ever be able to repay your debt but you can commit to making regular reduced payments for the duration of the agreement.

If you can do this, and your unsecured creditors agree to allow the IVA to go ahead, they will freeze all interest on your debts, not take any legal action against you, and agree to write off any remaining unsecured debt once the IVA has reached a successful conclusion.

Who are IVAs appropriate for?

As mentioned, an IVA would only be suitable if you have a high level of unmanageable debt that you can’t afford to repay within a reasonable timeframe. An IVA may be suitable for people who:

• Cannot afford their monthly debt repayments as they stand.

• Don’t want to risk losing their home (and other assets) by declaring themselves bankrupt.

Advantages and disadvantages of an IVA:

There are several advantages of an IVA – for example:

• You can, in most cases, clear your debt in five years – any remaining unsecured debt will be written off once the IVA comes to a successful conclusion.
• An IVA won’t be published in newspapers, unlike bankruptcy.
• Your creditors won’t be able to take any legal action against you as long as you’re upholding your side of the IVA.
• You will know exactly when you will become debt free (as long as you carry out your side of the agreement as planned).

However, there are also downsides to an IVA – for example:

• An IVA will be shown on your credit report, which will affect the cost and/or availability of credit for six years.
• You may be required to release some of the equity in your home during the final year of the IVA – to repay more of your debt.
• Your IVA will appear in a public register.
• If you don’t keep up with your IVA payments, you may be declared bankrupt.

You may find this article on the Advantages and Disadvantages of an IVA useful:

http://www.thinkmoney.com/debt/IVA/iva-advantages-and-disadvantages-0-3292.htm (External link)