If you find yourself having to consider an IVA then it’s likely you’ll have lots of questions and concerns.
In this article we answer some of the most commonly asked questions about IVA’s to help you understand the process and what it might mean for you.
Q. What exactly is an IVA?
An IVA is a legally binding agreement made between you and your creditors to repay your outstanding debt. Instead of entering into separate repayment plans, all your debts are essentially consolidated and then repaid with one affordable monthly repayment. An IVA has to be formally managed by a recognised insolvency practitioner (usually an accountant or solicitor) and will last for between 5 and 6 years.
At the end of the arrangement any remaining debt will simply be written off and your creditors won’t be able to pursue you for any leftover balance.
Q. Do I have to pay to enter into an IVA?
Yes. You can expect to pay around £5,000.00 to your insolvency practitioner although the cost of this can usually be spread over the 5 years. If your insolvency practitioner wants payment up front then you should ensure that your proposal will be accepted by your creditors otherwise you could well find yourself out of pocket.
Q. Can an IVA cover ALL of my debts?
This very much depends on which debt types you have. Whilst the vast majority of debts can be incorporated into an IVA there are certain exceptions – for example, child maintenance arrears, student loans and Court fines. Consequently if you have any debts which can’t be incorporated into the IVA then you’ll need to make separate arrangements for these to be repaid. You should ask your advisor for advice on this as you’ll need to ensure that, once arrangements have been made for these, you still have enough left over to repay your IVA.
Q. Can I incorporate joint debts into an IVA?
No. An IVA can only cover one person although you can enter into ‘interlocking’ IVA’s. These connect two individual IVA’s and can help reduce any joint debts which have accrued.
Q. What happens if my financial situation changes during the arrangement term?
Your IVA will be reviewed every 12 months by your chosen advisor. However, if your financial situation changes (for example, you inherit any money or have a successful compensation claim etc.) then you must immediately notify your advisor of this.
Q. Will I be asked to sell my house?
If you have sufficient equity in your house then you may be asked to re-mortgage it during the last year of your IVA. However, this very much depends on its valuation and what you might release from it. You should always weigh up the pros and cons of an IVA before you apply.
Q. What happens at the end of my IVA?
Once the set term has come to an end you’ll be given a completion certificate by your advisor and your details will be removed from the Insolvency Register 3 months after the arrangement ends. Any remaining balance will simply be written off and you’ll be free to rebuild your credit history more positively.