If you’re struggling to manage your debts, an Individual Voluntary Arrangement can be highly beneficial. Not only will it ensure you pay back your creditors, but when your IVA completes, your credit file will be clean, which means you can rebuild your credit score.
While there are many advantages of an IVA, it can be a struggle to understand the restrictions you’ll be under.
One of the biggest questions we get from our clients is whether they’ll put their savings towards the monthly payments. As an IVA is a legally binding agreement, it’s essential to understand your limitations.
What Will Happen to My Savings?
You agree on a monthly payment when you enter into an IVA, and your creditors agree to leave you alone. Your practitioner will take your circumstances into account at all times, as you’ll need money for your living expenses, including household bills and grocery shopping.
As you’re expected to pay off the money as quickly as you can, your savings will automatically go towards the IVA, which will essentially reduce your monthly repayments.
While most savings are included, special rules surround your pension, so you don’t need to worry about losing that.
Can I Still Save Money?
If you’d like to put money into a savings account during your IVA, it will have to come out of your allocated living expenses. Some people choose to cut down on their food shopping and walk instead of driving so that they can put any spare money into a bank account each month – but if you choose to do this, you’ll still need to be open and honest with your insolvency practitioners.
What If I Hide Assets From My Insolvency Practitioner?
It can be tempting to hide money from your insolvency practitioner – especially if you’re keeping up with your monthly payments. However, there are many issues with doing this, and you must remember that your IVA is a debt management plan that’s in place to repay your creditors.
While your arrangement can benefit your financial situation, your creditors want their money back, and an insolvency practitioner must place the creditor’s interests above yours.
If you don’t notify the practitioner about your savings, you’ll have to deal with severe implications. For example, if you hide money and get caught, your IVA agreement will immediately end, and you might be declared bankrupt.
In some cases, you can even lose the money you tried to hide in the first place. Hiding money might seem like a good idea, but it’s much better to be upfront and honest with your insolvency practitioner.
Could I Face Legal Implications For Breaching an Individual Voluntary Arrangement?
When you ask insolvency practitioners for debt help, they’ll make you aware of your legal obligations before entering into the arrangement. But, once you sign on the dotted line, you’ll have to stick to the rules or face serious implications.
Your practitioner will be responsible for monitoring your finances, and while essential living costs are always included in the arrangement, you’ll need to declare any lump sums.
Windfall Clause
All IVA’s have a windfall clause, which protects your creditors should you come into a lump sum of money. Windfalls are classed as inheritance, a lottery win or insurance payout, and they count towards your IVA.
The only case when windfall isn’t included in your IVA is if the amount you receive is under £500. Everything else must be included in your IVA unless there are special circumstances. For example, you might need an insurance payout to pay for medical expenses following an accident.
In general, you should always talk to your IVA providers to make sure you’re within your rights to keep the money. While some people hate the idea of using a windfall to pay off their outstanding debts, it can be the perfect opportunity for you to become debt-free and rebuild your credit score.
Would You Like Some Debt Advice?
When you owe money, it can cause considerable stress, and it’s only natural to want to find the quickest possible solution. In many cases, an IVA is the best debt solution because it enables you to pay off your creditors and rebuild your credit rating.
As soon as an IVA begins, you’ll need to follow the strict rules and regulations in place and contribute any excess income to your creditors. You’ll always have enough money to live on, and we can help you to secure the best possible deal for your needs.
If you’d like to discuss your financial situation with our friendly team, please don’t hesitate to get in touch. You’ll have the opportunity to talk to a licensed insolvency practitioner, who will speak with you about what to expect when joining the individual insolvency register.
We’ll also evaluate your total debt and make sure you know all the details of the IVA rules before we draft the proposal.
Our independent service has helped many people to free themselves of their remaining debt, and we’d love to support you. Please don’t hesitate to contact our friendly team today.