What Is An IVA?

In the current financial climate many of us are feeling the pinch and increasingly finding that our outgoings are more than our incomings. However, for some people the situation is much more desperate and they have built up large debts which they now find they cannot repay. Some of this will be credit cards where the credit limit has been unreasonably high. Some will be loans which have been used to clear other debts.

There are several ways in which to help yourself if you find paying your debts is getting more and more difficult. The first and most important thing to do is to speak to your creditors. These are the companies you owe money to. They may not be very understanding but usually they do have procedures in place to follow.
One of the options available is to set up an Individual Voluntary Arrangement (IVA). It can be seen as something of a last resort, as it involves contacting an Insolvency Practitioner (IP), who will set up the agreement. Very often one of your creditors will recommend a particular company with which they have regular contact.

Once applied, it is a legally-binding agreement with creditors that an individual will pay back as much money as they can. Some outstanding monies can be written off, with percentages varying between firms and situations.

It takes the form of a consolidated lump-sum payment, which can be paid to the IP each month. The company either absorbs this itself or distributes it among those who are owed cash.

The length of time money is paid back can be greatly extended by choosing to do this, but the payments may be lower. Often, the IP will pay off the other creditors, effectively taking on the debt itself.

Gaining credit in the future if you agree to an IVA could be made very difficult, so it is important to look at all debt options available and seek independent advice before signing an agreement.

If you would like to find out more about IVAs why not ask AnswerBank Business and Finance.