Aug
16
What are the requirements for an IVA?
An IVA (Individual Voluntary Arrangement) is a legally binding debt solution in which you’ll be required to repay as much of your unsecured debt as possible over a designated period of time (normally five years), after which any remaining debt will be written off by your lenders – as long as you’ve lived up to your side of the agreement.
Entering an IVA will affect your credit rating, and if you’re a homeowner you may be required to release equity from your property – but it’s a way of clearing your debts without being declared bankrupt.
However, an IVA isn’t an option for everyone.
IVA requirements
Before you can enter an IVA, there are some important criteria you will need to meet.
1. You must have significant unsecured debts that you can’t afford to repay within a realistic period of time.
2. You must be able – in most cases – to commit to making regular payments towards an IVA for five years. (Note that you’d be required to contribute a portion of any increase in income you receive while your IVA is in progress – like payrises and bonuses.)
What if an IVA isn’t right for me?
If, after speaking with a debt adviser or an Insolvency Practitioner (IP – the person responsible for the setting up and running of an IVA) you find that an IVA isn’t your best option, or your creditors don’t agree to the IVA going ahead, you may be advised to look into a different debt solution.
If you cannot afford to repay your debts in full, you may find that bankruptcy is your best option – which, despite its serious consequences, is still the most suitable option for some borrowers.
However, if you believe you will be able to repay your debt in full but over a longer timeframe, a debt management plan may be a better option for you.