Debt Relief Order
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Individual Voluntary Agreements (IVAs) are a useful tool for managing unaffordable debts, but such arrangements do impose restrictions on the people who use them. For example, they will make accessing credit more difficult both in the short and longer-term.
We should first illustrate what is an IVA. It is a legally binding agreement which allows you to pay back an affordable amount of what you owe to creditors over a fixed period. At the end of the arrangement, any remaining debts will be written off.
Details of IVAs are held on a public record called the Individual Insolvency Register. When you apply for credit during the term of an IVA, the lender is likely to check the register and details of the IVA will be noted on your credit file by credit reference agencies.
Your credit score will be affected as a result of entering into an IVA and the details of this arrangement will not be removed from the register until three months after it has ended. This will make accessing credit more difficult.
Although you can get credit during an IVA, you must tell your insolvency practitioner if you intend on taking out more than £500 of credit during the lifetime of the agreement.
Some companies specialise in lending to people with an IVA, but you will most likely be offered a low limit and have to pay a higher level of interest.
Once your IVA ends, you will receive a certificate of completion. Your information will shortly be removed from the Insolvency Register and credit reference agencies should automatically be updated, but it is always worth checking your file to make sure this has been done.
You can also ask for a note to be added to your file explaining why you got into financial difficulty and had to apply for an IVA, such as redundancy or illness.
Your credit score should return to a better status and you can start looking into rebuilding your rating. It may still be difficult to get good deals on credit but keeping up repayments and remaining within limits should positively affect your score.
An IVA can seem like a complex financial product but if you have any queries around this agreement, our trained advisors will be happy to answer your questions. To find out whether this solution is right for you, get in touch today.
Debt write off applies to unsecured debts and on completion of an IVA. A debt write off amount of between 20% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
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