An IVA is a legally binding agreement with your creditors to pay back some or all of your debts over an agreed period. It can help you get out of debt and is a good option for people who can’t afford to file for bankruptcy.
How to Apply for An IVA
A qualified Insolvency Practitioner (IP) will review your finances and work out how much you can afford to pay each month towards your debts. They’ll also take into account your income and expenses, as well as any assets you own. The IP will write a proposal detailing how much you can afford to pay each month and will share it with your creditors.
Your IVA will usually last for five or six years and, at the end of that time, your debts will be written off. However, you may be able to extend it for an additional year by offering to make a one-off lump sum payment.
How an IVA Works
Creditors will no longer be able to contact you, send letters or call you on the phone. They will also no longer be able to attend your home and repossess any items in it.
You won’t have to sell your home if you get an IVA, although some of the equity in it will be taken into account. It’s worth asking your IP for a valuation of your home before you apply for an IVA so that you know how much you’re likely to have to contribute to the arrangement.
It’s important to keep in touch with your IP and let them know about any changes to your financial situation, for example if you lose your job or if you get money from an inheritance. Your IP will then be able to advise you on how best to deal with any changes that are needed to your IVA.
Getting an IVA isn’t easy and it’s best to seek advice as soon as you can. You’ll need to show that you’re struggling financially and don’t have enough spare money each month to make payments to your creditors.
How an IVA Affects Your Credit Record
An IVA will appear on your credit report for six years, starting from when it was approved. This is because it is listed on the Individual Insolvency Register, an online database used by credit reference agencies to update your credit rating. This means that lenders will see it when they’re checking your credit history and, as a result, it could affect your ability to borrow money in the future.
Your credit rating will probably start to improve after your IVA is marked ‘complete’, but it can take some time to get there. In some cases, it can take up to seven years for your credit rating to improve completely.
How to Stay in the IVA Once You’re in It
When you have an IVA in place, you’ll be required to keep making contributions each month. These will usually be automatically deducted from your chosen bank account at the same time every month, and will be split evenly between your creditors.