Debt Relief Order
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An IVA will generally last for five years – but with everyone’s circumstances being different, the length of an IVA can differ on a case by case basis.
First, it’s important to know what is an IVA. This stands for Individual Voluntary Agreement and is designed to help people deal with their debts. In essence, it is an agreement with creditors to make payments in line with what individuals can afford to pay. Often these sums are taken directly out of the debtor’s wages.
An IVA is an alternative to bankruptcy for dealing with problem debt. In most cases, an IVA is preferable for both the lender and the debtor. The debtor doesn’t have to file bankruptcy and, in many cases, a creditor can recoup more of the debt through an IVA than through bankruptcy proceedings.
Generally speaking, an IVA will last for around five years. This allows the creditors to recuperate as much as possible owed to them, yet repayments are typically 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.
An IVA is an agreement, however, and has to have approval from your creditors before it can become official. As part of this process, a time frame will be discussed with you which takes into account your particular circumstances to determine the right repayment schedule.
At the end of your five-year period you may need a 12-month extension if you have more than £5,000 of equity but can’t remortgage your property. An IVA may also negatively affect your credit score, which could lead your mortgage company to refuse your application to remortgage.
This time frame also differs depending on your repayment schedule. If you have regularly missed agreed payments or reduced the amount you pay each month, your IVA plan is going to last longer.
Your IVA is always subject to re-evaluation in line with your circumstances. If they change for the better and you’re able to afford higher repayments, you’ll have the option to pay your IVA off faster. If your finances improve, it may become mandatory to start contributing a higher proportion towards the agreement.
It’s also worth bearing in mind that the majority of IVA plans have a “windfall clause”. In this situation, if you happen upon a windfall of any kind during the IVA, it will go towards paying your debts. It’s also possible to pay off an IVA early if you’re able to put together an acceptable lump sum payment.
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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