IVA

An IVA, or Individual Voluntary Arrangement, is a debt solution designed to help you avoid bankruptcy by making an agreement to pay off a certain amount of your debts within a fixed period of time. There are many serious consequences of being declared bankrupt, and as such it is often wise to find an alternative solution. An IVA can help you get rid of your debts within five years and even prevent any additional interest or charges being added to your existing debt.

Is an IVA right for me?

If you have borrowed too much money or overcommitted yourself an IVA could help you avoid bankruptcy. IVAs are only available in England and Wales, Scottish residents should consider a Trust Deed instead.

An IVA is generally best suited to people who have high outstanding debts that they don’t think that they would be able to repay in full. To enter an IVA your creditors will have to agree to write off a percentage of the debt owed, and in return you must commit to making a monthly payment for five years.

Individual Voluntary Arrangements are not for everyone, so before taking the leap it is worthwhile considering the pros and cons to such a major financial decision.

Advantages

An IVA freezes your debts, preventing any additional interest and charges being added on to the existing debt. More often than not when repaying debts you monthly repayments are simply covering the interest charges, making it seem like the debt is never decreasing.

As long as you stick to your side of the bargain by meeting the monthly repayments, the companies you owe money to are unable to proceed with any legal action, or even chase you with letters and phone calls.

Once the fixed period is up the remainder of your outstanding debts will be written off, allowing you to wipe the slate clean and start all over again financially. Self-employed people may face the problem of not being able to go bankrupt due to their work so an IVA is a great alternative.

The monthly contributions are not set in stone and will be based on your personal circumstances and the amount of money you have spare to make repayments. IVAs are also more private than bankruptcy as they are not published in the newspaper.

Disadvantages

An IVA cannot wave a magic wand and make all your problems disappear, it does have it negatives and consequences. You must declare all assets and liabilities, some of which you may be required to sell in order to raise funds. Whilst in the IVA you will have to stick to the original budget for the entire term of the arrangement, and any additional monies such as lottery winnings or inheritance must be declared.

An Individual Voluntary Arrangement or IVA is not the only way out of debt, there are alternative solutions if this is not suitable to you. Contact Rite Financial to discuss your circumstances and start on the path to financial freedom.