Due to various circumstances, there are always people who get into debt and later on struggle to settle the payments. This can be attributed to various factors such as overall economic conditions or personal issues. In case you have been exploring ways on how you can get out of debt, you may have stumbled upon the Individual Voluntary Agreement (IVA). This article tackles everything that you need to know about IVAs.
What is an IVA?
An IVA is an agreement between you and your creditors that you will pay back your debts over a specific timeframe. This is legally binding, which means that both you and your creditors need to stick with it as it is approved in court. While it can be quite flexible, and one of the most viable options to help you settle your debts, there are still certain risks involved.
How does it work?
Only a qualified person referred to as an insolvency practitioner, can set up an IVA. Insolvency practitioners can either be a lawyer or an accountant, which means that they can charge reasonable fees for their services. Nevertheless, they will be the ones who will deal with your creditors throughout the life of the IVA filed.
They are also the ones who will figure out how much you can pay each month, and your creditors must agree to this before the IVA starts. To have a good idea of how much of your debt can be written off, as well as the amount that you still need to pay back, you may want to leverage an online IVA calculator. First, this calculator will allow you to move a slider representing your outstanding amount. From there, your total outstanding amount payable and total write off will be displayed in a dedicated box.
Your repayments will be made directly to the insolvency practitioner and they will be the ones to distribute your payments to your creditors. As soon as you finish the last payment, you will receive a certificate of completion. Just keep in mind to ensure that you don’t miss out on your payments because there are still penalties and repercussions if you do.
Is IVA the right option for you?
Your overall financial situation will dictate whether an IVA is the right option for you. One of the main benefits of going for an IVA is that it allows you to have more control of your financial situation as opposed to declaring bankruptcy. Aside from this, your creditors have to stick to it too, which means that they won’t be able to come after you for your debts as soon as it is in place.
More often than not, an IVA will prove to be beneficial if your debts already add up to more than £10,000 or when you have more than two creditors. If you also don’t want to directly deal with your creditors, then an IVA is a viable option. In case you are an accountant, a lawyer, or an individual who works in financial services, then you may want to verify your contract first to see whether you can get to keep your job should you pursue an IVA.
How do you get an IVA?
If you deem that an IVA is the best option to help you get out of debt, then you need to first apply to the court for an interim order through your insolvency practitioner. From there, you need to discuss your finances and repayments with your insolvency practitioner. Keep in mind that you may need to offer as much as you can reasonably afford for your creditors to agree to the IVA.
As soon as you and your insolvency practitioner are thorough in evaluating your overall financial standing, you need to come up with a proposal for your creditors and the court. More often than not, this proposal includes your full financial statement, as well as the terms of your proposed IVA. You should also lay out the reasons why your creditors should agree to the IVA. From there, your creditors can either approve or reject your proposal.
If you are struggling to pay back your debt, you can consider getting an IVA. In this case, you need to assess your overall financial situation to determine whether this is the most viable option there is for you. From there, you simply need to follow the steps to acquire the agreement. As soon as you become debt-free, ensure that you perform the necessary steps to maintain your status and never have to stress about what you owe again.