An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between an individual and their creditors in the UK. It is a debt solution designed to help individuals who are unable to pay their debts in full but have a regular income.
With an IVA, the individual agrees to make monthly payments to an insolvency practitioner who then distributes these payments to their creditors. The payments are generally lower than the individual’s current monthly debt repayments, and the agreement usually lasts for five years.
One of the benefits of an IVA is that it allows the individual to avoid bankruptcy, which can have serious consequences for their credit score and future financial prospects. Additionally, any remaining debt after the IVA is completed is usually written off, giving the individual a fresh start.
However, there are some important considerations to keep in mind when deciding whether an IVA is the right solution for you. Firstly, it is important to seek professional advice before entering into an IVA, as not everyone is eligible and there may be other debt solutions that are more suitable.
It is also important to understand that an IVA will have an impact on your credit score, as it will be reported to credit reference agencies. This may make it more difficult to obtain credit in the future, and any credit obtained during the IVA period may have higher interest rates or stricter terms.
Finally, it is important to be committed to the IVA and making regular payments. If you fail to make the agreed payments, your creditors may be able to take legal action against you, and the IVA could fail.
Overall, an IVA can be a suitable option for individuals struggling with debt, but it is important to seek professional advice and understand the potential implications before entering into an agreement.