Would an IVA be right for me?

If you’re struggling with an unmanageable level of debt, you may be wondering whether an IVA (Individual Voluntary Arrangement) would be right for your circumstances.

An IVA is a legally binding financial agreement between an individual and their unsecured creditors. It involves a change in the way the individual repays their debt, enabling them to repay as much of it as they can afford.

In most cases, an IVA will last for five years – during which time the individual will make the reduced monthly payments both they and their creditors have agreed to.

An IVA can only go ahead if 75% of voting creditors agree to the terms set out in the IVA proposal (a document compiled by the individual and their Insolvency Practitioner detailing how the borrower plans to repay their debt, and how much of it they can afford to repay within five years).

Now we know what an IVA is, it’s time to find out if one might be right for your situation. (further information at this can be found at the www.iva-forum.com)

In general, an IVA would only be suitable for you if you are struggling with an unmanageable level of unsecured debt that you can’t afford to repay within a reasonable period of time – but that you can commit to making reduced monthly payments towards.

If you can’t commit to making regular payments and/or your income isn’t ’steady’ (i.e. you earn a different amount each month), you may find that an alternative debt solution is more suitable for you.

As with other debt solutions, there are several points you will need to consider before entering an IVA, and some of these are covered below:

* If you are a homeowner, you may be required to release some of the equity in your property during the 54th month of the agreement. This money will be used to repay more of your overall debt.

* Entering an IVA means you are entering insolvency – and this will show up on your credit report. It will remain there for six years from the day your agreement begins, which could affect the cost and/or availability of credit for this time.

Assuming everything works out and the IVA concludes successfully, any remaining unsecured debt will be written off at the end of the IVA.

Of course, the only way you’re really going to know if an IVA is right for you is by speaking to a professional debt adviser or Insolvency Practitioner.