IVA Definition

Introduction to IVA Definition

An IVA is the name given to an agreement that is set up between debtors and the people they owe money too. If you find that you are having problems making your repayments this will be an avenue that you should explore. It will clearly not be right for everyone, but there are many people who will both find it the best way to clear their debts, and for many it is the only way they can deal with them unless they declare themselves bankrupt. It is becoming more and more common for people in the United Kingdom to need this type of arrangement.

IVA is short for Independent Voluntary Arrangement and can see you clear of your debt after a period of 5 years. It will also mean that you do not have to pay back all the money that you owe. You can find that you do not need to repay up to 75% of the debt you have accrued as your creditors may be glad to know they are getting at least part of the debt back..

How to Set Up an IVA

This is not something you can do on your own and you can get help and advice all the way through. For some people once it is set up they do not need much contact with the Insolvency Practitioner who is working on their behalf. At the beginning they will be the person who sets up all the payment details with the creditors.

This may seem like an easy option when you consider that some people become bankrupt when they can no longer pay off their debts, but it is a legal arrangement and failing to comply with the conditions can mean that you do still end up bankrupt. The creditors also have legal obligations as once they have agreed to accept a monthly repayment they cannot back out or insist that it is increased as long as the payments are met.

Can Anything Change Over the 5 Years?

There are times when you find that you do have to make alterations and this can be if you receive a windfall. If you suddenly receive money and you have no control over this it may be that you have to pay back more money. If you are a home owner you will also be asked to have your home re valued. If it turns out that you have equity in it there could be the need to pay back a percentage of this. Slight changes in finances such as odd bits of overtime and receiving money for Christmas or birthdays will not be considered as money that needs to be included. It will be best to notify your Insolvency Practitioner if you change jobs or you get a pay rise as there could be the need to pay back more.

When Will I Be Debt Free?

As long as you make the payments you will be debt free in 5 years. The fact that you have had an IVA will be on your credit record for a further year so you could still struggle to get credit during that time. The more time that passes the easier it will be to find companies to lend you money.