What is an IVA? Or is called an AVI?
Financial jargon is somewhat, like the calculations required in the painful
thrust of Sudoku! But fear not - here comes your moment of exasperation. IVA’s
are uncomplicatedly defined as “Individual Voluntary Arrangement”. As
www.iva-info-uk.org.uk describes
IVA’s is a legally binding agreement between you and your creditor. It allows an
individual in financial difficulties to make a formal proposal to settle their
debt within a reasonable and fixed period of time (normally 5 years). Any
interest and debt charges will be frozen and creditors will be prohibited from
demanding additional payments. An IVA involves making monthly payments based on
an affordable disposable income. Once the final payment is made, any outstanding
debt is legally written off. As thus the arrangement can write off up to 95% of
your debts (subject to your circumstances).
IVA’s can be the most practical
solution, depending on the individual’s circumstances. IVA’s have a minefield of
attributes that are worth noting. For instance an IVA will: prevent any legal
actions against you, freeze debt interest and charges, cancel out any existing
CCJ's, cease demanding letters and phone calls from your creditors. Your case
will also be strictly confidential and you will not be published in the local
paper, therefore no knock-on effect on your professional life. In regards to
payment it will require one solid repayment fee, usually a minimum of
£200/month. One other comforting thought, is that your creditors will deal with
Insolvency Practitioners, thus relieving you of phone calls and written
reminders. All remaining debts will be written off at the end of an IVA, if
fulfilled successfully. Another factor is IVA, creditors cannot change the
conditions of the agreement unless approved by you, and you will be involved in
the choice of assets made available to creditors. As long as 75% of your
creditors all agree with the terms of your IVA the other 25% are legally bound
to the agreement as well. But lastly, but most importantly it will give you the
opportunity to give yourself a fresh credit slate.
Though the benefits are
incredibly enticing, there are some factors that should be considered prior to
your final decision. As the well –repeated adage would suggest, ‘where there is
good there is bad’. IVA’s unfortunately fall in that pool of thoughts. One of
the disadvantages of IVA is that you may require the possible Release of Home
Equity. This means, if you have any equity in your property (or any other
significant valuable assets), you may be required to release some or all of this
as part of the IVA agreement. Also, in taking on an IVA it may also result to
Minimum Level of Debt. Normally you will only be able to undertake an IVA if
your total unsecured debt is more than £15,000. In addition, you will need to be
able to afford a monthly payment of at least £200. Having undergone an IVA,
there is no unsecured borrowing during the arrangement while you are in an IVA.
You will not be able to use your store or credit cards. These must be cut up.
You normally may not be allowed to borrow any more money until you have
successfully completed your arrangement. It may however be possible to change an
existing mortgage.
In retrospect, IVA is one
healthy option that can help deter the financial burdens of debts. Yet like any
life changing decisions, it is best to consult professional debt advisors, or
even chat to friends, family or even forums such as
www.iva-info-uk.org.uk/forum/
will provide you with ample advice and insightful information on your personal
IVA concerns.