Find out more about how an Individual Voluntary Arrangement (IVA) works and which debts it covers. Then talk to a free debt adviser about whether it’s the best way to pay off or clear your debts.
How an IVA works
An Individual Voluntary Arrangement (IVA) freezes your debts and allows you to pay them back over a set period.
Any money you still owe after this period is then written off.
You can apply for an IVA if you can afford to pay something towards your debts but not necessarily the full amount your creditors want.
You will need to show you have a regular long-term income as the repayments will usually cover a period over 60 or 72 months (five to six years).
If you have a lump sum to pay towards your debts, you might also qualify for an IVA.
The IVA is set up by a qualified professional called an Insolvency Practitioner, who will work with you to put together a proposal to take to your creditors for approval.
It very much depends on what your circumstances are as to whether they will agree to the plan.
An IVA is a legally binding agreement between you and the people you owe money to.
This means once you’ve signed it, neither you nor your creditors can back out. So you need to make sure it’s right for you.
Which debts can you pay off with an IVA?
You can use an IVA to help pay off many common debts, including:
- Personal loans
- Catalogue debts
- Council Tax arrears
- Hire purchase debts
- Mortgage shortfalls
- Credit and store cards
- Money you owe to HM Revenue & Customs, like income tax or National Insurance contributions
Which debts can’t you pay off with an IVA?
You can’t use an IVA to pay off:
- Student loans
- Magistrates’ court fines
- Certain types of car finance
- Child maintenance or Child Support arrears
Mortgage and rent arrears
Technically, you’re allowed to include mortgage and rent arrears and other secured loans against your property in an IVA.
However, your creditors have to agree to this and often they won’t do so.
Check with a debt adviser what you can and can’t include in an IVA.
How to set up an IVA
You have to set up an IVA through an Insolvency Practitioner.
There are fees to pay to the Insolvency Practitioner which are usually taken from your monthly payments.
You should not have to pay any up-front charges before your IVA has been set up.
Get free advice about setting up an IVA
“We were so ashamed of our debt problems that we avoided telling people. Trying to live life normally and pretend that everything was ok was very difficult.”
Hayley – who runs the Disease Called Debtopens in new window website and cleared debts of £41,000.
It’s always best to talk things through with an experienced debt adviser before you decide to take out an IVA.
This is because the debt solution is best for you depends on your personal circumstances and might not be this one.
Debt advisers can help you make the right decisions so most of your money will go to paying off your debts.
Which means you could be debt free sooner than you thought.
A debt adviser will:
- treat everything you say in confidence
- give advice about better ways of managing your money
- never judge you or make you feel bad about your situation
- suggest ways of dealing with debts you might not know about
- always be happy to talk to you, however small or big your problem is
- check you have applied for all the benefits and entitlements available to you.
You might only need to have one conversation with an experienced debt adviser to make sure your plan to manage or clear your debts is the right one for you.
If you need more support or don’t know where to start, you’re not alone.
Nearly half of people in debt told us they aren’t sure about the best way to pay off their debts, and this is where a debt adviser can really help you.
Over eight out of ten people who have got debt advice tell us they feel less stressed or anxious and more in control of their life again.
People who let a debt problem build up often find things have:
- Spiralled out of control
- Their cards are maxed out
- No-one else will lend to them, and
- It takes much longer to pay back what they owe.
“Debt advice just changed the way I dealt with it. Getting rid of the shame. I am only sorry it took me so long.”
A debt advice client.
Debt advice is free and confidential and you can contact an adviser in a way that’s best for you – online, over the phone or face-to-face.
So join one of the hundreds of thousands of people we help each year and take the first step tao being debt free.
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