An Individual Voluntary Arrangement (IVA) can be a lifeline if you’re overwhelmed by debt and struggling to make repayments. It allows you to consolidate your debts into a single, manageable monthly payment over a set period, typically five or six years. Once you’ve completed your IVA, any remaining unsecured debt is usually written off, offering you a fresh start.
How Does an IVA Work?
An IVA is a formal agreement between you and your creditors, arranged by a FCA Regulated Debt Advisor . They will assess your financial situation, including income, living costs, and outstanding debts, to determine how much you can afford to pay each month. The IVA proposal is then sent to your creditors, and if 75% (by value of debt) agree, the IVA becomes legally binding on all.
Writing Off Debt with an IVA
The key benefit of an IVA is that once the agreed term ends, any unpaid debts included in the arrangement are written off. You only pay what you can afford for the duration of the IVA, and after it concludes, creditors are no longer able to chase you for the remaining balance. This makes an IVA a powerful tool for clearing debts without the extreme consequences of bankruptcy.
Can I Keep My Home and Assets with an IVA?
One of the most common concerns about entering into an IVA is whether you’ll lose your home or other valuable assets. The good news is that, in most cases, you can keep your home and personal belongings while managing your debts through an IVA.
What Happens to My Home?
If you own a property, an IVA typically allows you to keep it, as long as you can maintain your mortgage payments. Toward the end of the IVA, you may be asked to release some of the equity in your home to contribute to your repayments, but this is usually done by remortgaging. If you can’t release equity, your IVA may be extended by an additional 12 months instead.
What About Other Assets?
Most personal assets like vehicles, furniture, and other household items are usually unaffected by an IVA. The focus is on your disposable income to repay debts, not on liquidating assets.
In summary, an IVA provides a structured way to manage and write off your debts while allowing you to keep your home and essential assets, offering a more balanced approach to debt relief.