An IVA is a formal repayment plan between an individual and their creditors, which allows them to repay their debts in one affordable monthly sum. What you pay is calculated based on your income & expenditure, allowing you to live your life reasonably, without receiving any further creditor action, such as CCJ’s or bailiffs. It is a means of avoiding bankruptcy and enabling protection of major assets like properties.
How does an IVA work?
To formally set up an IVA and start the process, it requires the work of an insolvency practitioner. It must be agreed to by the creditors involved and is then managed by the insolvency practitioner. An IVA will see all of the individuals’ debts pooled together, with then an affordable repayment plan designed to slowly pay the creditors back a portion of the monies that they are owed. Typically, an IVA lasts around 5 years, however, if there is a lump sum offered in a settlement, or payments are missed or increased it can be shorter or longer.
Benefits of an IVA
Individual voluntary arrangements are typically most appropriate when you have unsecured debts exceeding £10,000. They are normally more appropriate for larger debts or if you have personal assets like properties, as it will essentially give protection from any creditor action.
- An IVA halts all unsecured creditor action (including the use of bailiffs) and takes the pressure off.
- IVA proposals are created based upon what is affordable to the debtor, alleviating multiple, unaffordable creditor repayments.
- You can often retain your home through an IVA. Mortgage repayments are also factored into a person’s outgoings when determining the affordability of IVA repayments.
- Any remaining debt is legally written off after your last IVA payment.
How does an IVA protect my assets, such as a house?
Your home is protected for the duration of the IVA. While you adhere to the IVA’s terms, creditors cannot take action to reclaim debt from you, and your assets should also be protected. You should make your supervisor aware of all the assets of significant value you own before the IVA commences. Certain items may be considered excessive if they’re included in the IVA, or if you try to sell them.
Will I have to re-mortgage?
Although a IVA will almost certainly protect your house in the short-term, if you have equity, you will be expected to re-mortgage in order to release equity. However, there is a limit on the amount that you will be expected to re-mortgage, which is based on the value of your home. You will also not be expected to re-mortgage if the new mortgage extends beyond the existing term, or retirement age. There are also restrictions on the re-mortgage based on the amount of the monthly payments being made in the IVA, and the impact that the repayment of any new mortgage would have on this.
How we can help
If you’re worried about your personal debts could lead to you losing your home, or having some of your belongings repossessed, an IVA can give you that protection and peace of mind. We can help you come to an agreement with your creditors, that works for all the parties involved and give your home that protection. Get in touch, and we can give free advice, via online chat, a phone call or a face-to-face consultation.
An IVA provides individuals with a form of protection against their creditors, as they are no longer able to issue CCJs or use bailiffs. (Acceptance of an IVA)
By going through the process of an IVA, an individual’s house can also be protected and having to sell it can be avoided. There may be a requirement to re-mortgage to complete the IVA but this would all be discussed in advance of entering the agreement.
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