Many people now adays are considering IVA’s and have seen the ads on television. However, I have a word of warning for you, IVA’s should only be considered as an alternative to bankruptcy.
The advantage of an IVA is that you get to keep your property such as your car, house, etc.
Some people have been decieved into believing that IVA’s are to be taken lightly, dont take them lightly. IVA’s are usually recommended for only about 3% of people with debt problems.
Before considering whether or not you should get an IVA, first seek competent financial advice.
Its important you talk to an impartial expert, not to someone who will earn a commission from signing you up for an IVA.
A qualified debt counsellor will show you how to deal with your debt, and solve the problem. In the UK, anyone with unsecured debt of over 20,000 pounds can take out an IVA.
There are some types of loans you cannot take out an IVA for such as:
Overdrafts
Personal loans
Credit and store cards
Catalogue debts
Student loans
Mortgages or other loans secured on your property cannot be included in an IVA. Neither can taxes, rent, fines or child support.
In order to do an IVA you need to hire an Insolvency Practicioner, usually these are accountants or lawyers, who will negotiate with your creditors on your behalf.
Then your insolvency practicioner will put together a package of what you can afford to pay in a lump sum or on a monthly basis. Your insolvency practicioner will also work with you to ensure its the best decision for you.
Standard IVA’s last 60 months, as long as you make all 60 payments the rest of your debt will be cleared.
Realistically you can eliminate up to 60% of your debt using an IVA. You have to understand a creditor will only agree to an IVA if they will get more money back than they would by forcing you into bankruptcy.
So the idea that you can keep everything and pay nothing isnt true, you still have to pay, just not the full amount.
Under the average IVA, you pay back 30% of what you owe. Some banks have recently started refusing anything that is less than 40% or 50%.
As a general rule you can expect to pay at least 200 pounds per month for 60 months. One of the keys that people look for in an IVA is if you have a stable income, being able to demonstrate your ability to pay for the IVA for 60 months.
The typical IVA costs around 7500 pounds. Typically this fee is deducted from your monthly payments. Naturally you can see why deciding on an IVA requires serious consideration.
You also must tell your insolvency practicioner if there are any changes in your financial circumstances – your finances will be evaluated on a yearly basis to ensure you are paying the most you can pay.
Its very important that you tell your insolvency practicioner immediately if your financial circumstances change. Failure to make even one payment towards the IVA could result in the destruction of the entire agreement.
If you are going to miss a payment ensure that you let your insolvency practicioner and the credit companies know in advance. If the situation change is permanent your insolvency practicioner may be able to negotiate a lower monthly fee for you – but there is no guarantee.
An IVA will be on your credit card file for six years. During an IVA you wont be able to borrow any additional money. The IVA will definatly affect your credit score negatively.
The main advantage of an IVA is being able to keep your house, if you are not a home owner it may not be the right option for you. You will be able to have a bank account while you have an IVA, but usually you cannot get a chequing account.
First go to a debt counselling agency who is impartial, and see what their advice is. Then you can make an informed decision whether or not an IVA is worth anything to you.
