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What is an IVA?

Can’t decide whether an IVA (Individual Voluntary Arrangement) is right for you? Take a look at our article and make an informed decision.

What is an IVA

If you’re wondering what an IVA is, read on. An IVA is a legally binding agreement between you and your creditors. It stops any legal action, freezes interest, and creates a repayment plan. IVAs have several benefits, including the ability to keep your credit score above 700. Here are the main advantages of an IVA. You might be able to afford the monthly payments in the future. However, an IVA can have negative effects on your credit score, and you should be aware of these before signing up.

It’s a legally binding agreement between you and your creditors

An IVA is a debt repayment arrangement that is legally binding between you and your creditors. Once the IVA has been completed, your creditors cannot pursue you further for your debt and they can’t pursue you through court action. IVAs have several benefits, including debt write-offs. Once approved, an IVA can provide a debtor with an opportunity to rebuild their credit rating. Listed below are the top benefits of an IVA.

First, an IVA allows you to freeze interest on your debts. This means that your creditors can’t harass you any more, which is good news for you. But be aware that an IVA will remain on your credit reference file for 6 years and can affect your ability to get further credit. That’s why you should always tell your IP if your circumstances change. A modification of your IVA may cost you additional fees.

It freezes interest

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors that freezes interest on unsecured debts and gives you the opportunity to pay back your debts with affordable monthly payments. Your creditors will be prohibited from taking any further action against you once the IVA is approved. A well-prepared IVA proposal will help you to pay your creditors in a more manageable manner. When the agreement is finalized, your outstanding debt will be written off, and you will not be able to pursue any legal action against you.

When you have an IVA, your creditors do not have to attend any meetings. Instead, they will vote by proxy – a person or organisation nominated to act on your behalf. In order for your IVA to be approved, 75% of them must vote in favour. Once the IVA is approved, your creditors will be legally bound to freeze interest and fees until your repayments begin. This is a crucial part of the process, and will help you avoid defaulting on your debts.

It stops legal action

An IVA is a type of debt management plan. In most cases, this type of debt management plan has a fixed duration, usually five years. During this time, the debtor can only make certain monthly payments. Any remaining balances must be legally written off. Once an IVA is agreed, creditors are prevented from taking legal action against the debtor. Here is how an IVA works. First, your IP sends the IVA proposal to your creditors. Next, you arrange a formal meeting with your creditors.

It creates a repayment plan

An IVA is a debt management plan that helps you repay your creditors in a manageable way. Once an IVA has been approved, the IP will collect your assets and sell them. The money from these sales will be paid to your creditors, and in some cases, you will be able to remortgage your home to raise a lump sum that will be applied to your debts. During the IVA, you must tell your IP if your circumstances have changed. If you cannot afford to keep up with the repayments, your IP will take action to recover the fees.

Usually, an IVA is for five years, but there are also shorter term IVAs. This will make sense for people who are about to retire or are ill. Another example of an IVA is when an accountant has debts of PS80,000. He owed PS80,000 on credit cards and unsecured loans and shared a home with his partner. The IP will then write to his creditors, explaining that the IVA will help him meet his financial commitments.

It reduces your chances of getting credit

Having an IVA on your credit file is likely to make it harder for you to secure a loan. Lenders use your credit history to decide whether you are likely to repay a loan. Because an IVA is not permanent, it isn’t immediately removed, but it will remain on your credit report for several years. You can also expect to pay higher interest rates if you are approved for a loan while it is on your credit history.

As an alternative to an IVA, you can also try a one-off payment. This is a great option if you have some savings or are selling an asset to raise the money. This option also releases funds to your unsecured creditors and could help you keep your home. You may find that you are unable to continue your business if you have to go bankrupt. In these situations, you can speak to your IP or seek debt advice.

It can be cancelled by creditors

Despite the good intentions of an insolvency practitioner and the debtor, sometimes IVAs can be cancelled by creditors. It’s important to keep in mind that you can’t cancel an IVA merely because you’ve changed your mind. While you can decide to stop making payments, this will breach the terms of the IVA and cause it to fail. If this happens, your IP will send you a termination notice. In the meantime, creditors may start adding interest and charges to the amount of money you owe them. It could be a matter of time until the insolvency practitioner will make the decision to declare you bankrupt.

In these cases, your bank can exercise its ‘right to offset’ against your IVA payments. In such a case, you might be unable to make payments or even meet the essential living expenses. This is where a switch to another bank account can help. A new bank account will prevent automatic debits. If you have no other option, you can choose a plan where you make a one-off payment to all your creditors.