When it comes to relieving themselves of debt, most people will agree that they’ll do anything to get back on track. It can be so difficult to owe money, and the stress of being in debt can impact your everyday life, mental wellbeing and even physical health.
There are plenty of effective debt relief solutions available for people struggling to stay on top of their monthly payments. An Individual Voluntary Arrangement is an effective way to pay off your debts and avoid filing for bankruptcy.
If you’re unsure how Individual Voluntary Arrangements work and which debts they cover, this guide will clear everything up.
What Is An Individual Voluntary Arrangement (IVA)?
An IVA is a legally binding agreement between you and your creditors that enables you to pay off your debts in an affordable monthly payment. During your repayment period, you don’t have to worry about increasing interest rates, and your creditors won’t be able to contact you directly.
All communication will go through your insolvency practitioner, and your creditors will also have to stick to their end of the agreement. One of the significant benefits of an IVA is that it gives you some breathing space, and you can pay off your debt without interest increases and losing your assets.
If you miss payments or fail to stick to the agreed-upon monthly amount, your insolvency practitioner might terminate the arrangement, and your creditors will be able to take further action.
Which Debts Does Your IVA Include?
There are many debts you can include in an Individual Voluntary Arrangement, including:
- Credit Cards
- Catalogue Debts
- Personal Loans
- Gas, Electric, Water and Council Tax Arrears
- Overdrafts
- National Insurance Arrears and Income Tax Arrears
- Benefit Overpayments including Tax Credits
- Store Card Debts
- Monies Owed to Friends and Family
- Other Outstanding Bills: Vets, Builders and Solicitors
All of the above debts can be a part of your IVA, but your individual circumstances might apply. As an IVA is a legally binding arrangement, it’s worth looking at whether you can pay off smaller outstanding bills before adding them to your IVA because it can shorten your payment term.
What About Secured Loans?
When you take out a secured loan, you’re borrowing money against a valuable asset. Creditors are more likely to award these loans because they have an exit strategy to recover the debt if you don’t keep up with your repayments.
The biggest issue with secured loans is you often put your home at risk, which means your creditors could repossess it or force you to release equity.
You can ask your debt management company to include your mortgage and secured loan in the arrangement, but it’s up to your creditors.
While your insolvency practitioners will approach them and try to put forward your case, you’ll have to find other debt solutions if your creditors refuse.
Is There a Limit to The Amount of Debt You Can Include?
Any number of debts can be included in an IVA, so it’s a completely flexible solution to paying off debts from various creditors. You can essentially consolidate all of your debts and roll them into monthly contributions, which will benefit you more in the long term and help you keep on top of things.
While there’s no minimum or maximum payment, you should be aware that IVA’s are more suited to more considerable sums of debt, so you might find it’s not the best option unless you have outstanding amounts of over £10,000.
Managing all your creditors in one monthly payment is a helpful way to pay off your debts, and you’ll still be able to budget for your essential living costs.
What Isn’t Included in Your Debt Management Plan?
There are strict regulations for IVA’s, and some debts aren’t eligible for your monthly repayments. They include:
- Child Support Arrears
- Student Loans
- Maintenance Arrears
- Social Fund Loans
- TV License Arrears
- Court Fines
If you have these debts, you can seek debt advice to discuss which options are best for you to consider.
What If I Have Joint Debt?
Joint debt is somewhat of a grey area when securing an Individual Voluntary Arrangement because only one person can enter into an IVA. There’s no such thing as a joint IVA, but if you and another person have priority debts, you can each take out an IVA that interlocks with the other.
Your insolvency service will be able to provide advice and support so that you can make the right choice for your needs. However, if one person doesn’t want to take out an IVA, you’ll need to discuss other options with your insolvency practitioner.
Would You Like to Speak to an Insolvency Practitioner?
If you’d like to speak to a specialist from the Insolvency Practitioners Association, we’re available to discuss your debt relief options and guarantee to provide guidance and support to help you navigate the Individual Insolvency Register.
Whether you want to manage your unsecured debts, joint debts, or you would like to discuss the potential implications to your credit rating; please contact IVA Online today.