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An IVA will generally last for five years. However, with everyone’s circumstances being different, the length of this agreement can differ on a case-by-case basis.
For example, if you receive a windfall or have a positive change to your financial circumstances, you may be able to pay this off early. Read on to find out how to do this.
An IVA stands for Individual Voluntary Arrangement and is designed to help people – just like you – get on top of their finances. It is a very popular form of insolvency with more than 122,000 of these being taken out throughout 2019.
In essence, it is an agreement with creditors to make payments in line with what individuals can afford to pay. In many cases, an IVA is preferable for both the lender and the debtor. The person taking out the IVA doesn’t have to file bankruptcy and, in many cases, a creditor can recoup more of the debt through this agreement than with other solutions.
As mentioned earlier, an IVA will typically last for around five years. This allows the creditors to recuperate as much as possible owed to them, yet repayments are often small enough to allow the debtor to keep enough of their wages. Once the IVA comes to an end, any remaining debts are usually written off.
If you’re a homeowner, you may be required to remortgage your property during the final year in order to release more than £5,000 worth of equity. If this cannot occur, however, your IVA may run for an extra year instead – meaning the IVA will last for six years as opposed to five.
Finally, your IVA may last longer if you have regularly missed agreed payments or reduced the amount you pay each month.
If your circumstances change, and you’re able to afford higher repayments, you may have the option to close your IVA early. There are also a couple of circumstances which can lead to you paying off this agreement much sooner than expected:
The majority of IVA plans have a “windfall clause”. This is when you unexpectantly receive a large sum of money, such as in the form of inheritance or a gift. In this situation, the windfall will typically go towards paying your debts. Depending on how much the amount is, you may be able to clear the IVA almost straight away. Otherwise, it should help to shorten the repayment period.
It’s also worth noting there are restrictions on what creditors can take as part of a windfall. For example, if you have redundancy pay or payments from insurance, this shouldn’t go towards the agreement.
If you have a large sum of money available, whether through a windfall or other means (such as the sale of an asset), you may be able to use these funds to repay your IVA sooner. Alternatively, you can propose a ‘full and final IVA’ to your Insolvency Practitioner. This solution is where, instead of making the repayments, you offer your creditors a large lump sum.
If this proposal is successful, your IVA should come to an end early.
The length of an IVA can sometimes put people off. However, considering debts are written off at the end of it and it’s a solution which takes your situation into account, many find it the best way to deal with their debts.
Still, it is a choice which shouldn’t be taken without expert guidance first. As a result, you should consider the pros and cons before committing. Fortunately, we are ready and standing by to answer any questions you might have.
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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Free money help and advice can be found at the MoneyAdviceService.org.uk