Individual Voluntary Arrangements (IVA)
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Ask your advisor for a personalised IVA example to see how much unsecured debt you could write off and calculate how much you could save per month!
We’ll ensure you only pay back what you can honestly afford, starting from £90/month
Never have to deal with scary phone calls or threatening letters from creditors demanding payment
No worrying about bills, payday loans, credit cards or debt collectors
“Without doubt the most professional Practitioners bar none. All conversations by email & telephone with both Marian & Zainab where extremely friendly & knowledgeable and not only put me at ease but gave me a better understanding of an IVA”
“Really quick to get IVA in place, Polite and interested in my problems and non-judgemental. Anyone who deals with this company will be able to stop worrying about creditors and will possibly be relieved of a lot of undue stress”
“When I first looked at this company the first person to call me (Steve) was very friendly and extremely helpful with understanding my situation. I didn’t realise I was in so much debt but now I am looking forward to a better financial future”
It seems too good to be true, right? You may be wondering: doesn’t getting your debts written off mean you’re completely free from repaying them? This article will go through what a debt write off actually is and how the process works.
If your debt is written off, it means that your creditors (the people or company(s) that you owe money to) agree not to pursue you further to repay it.
Each debt write off is very individualistic, and many factors will be considered by your creditors before they decide to agree to write off your debts.
Some common situations which might influence whether your creditors agree to your debts being written off include: serious mental or physical health issues, unemployment as a result of something outside of your control, or potentially any other reason resulting in your inability to repay your debts (will be discussed more in detail further down).
If your creditors agree to write your debts off, you’ll then be completely exonerated from repaying them.
So yes- writing off debt is actually possible.
However, having your debt written off does have consequences.
A severe penalty will be recorded on your credit file for at least 6 years.
This will make arranging a loan or purchasing anything on credit, including credit cards, cars and mortgages, within this timeframe, very difficult.
Lenders will look at your file and see that you are risky to lend to, thus making it very unlikely for them to be willing to provide you with a loan.
It’s also important to note that acquiring a debt write-off isn’t common.
Your creditors will typically only grant for your debts to be written off in a severe circumstance which prevents your ability to repay them within a reasonable time-frame.
Above all else, creditors will primarily want you to try and repay the full amount you owe them with any interest on top.
However, there are situations where your creditors are more likely to agree to having your debts written off. These can include:
If it becomes apparent that you will struggle or simply won’t be able to pay back your creditors within a reasonable time frame.
You provide evidence of an exceptional circumstance to your creditors that it won’t be worthwhile for them to pursue or take further legal action against you.
You possess no assets of value which could be used as a contribution towards your debts.
If you think one of the above points applies to you, in order to qualify, creditors will require you to provide evidence which clearly outlines why you won’t be able to pay them back in a reasonable time period.
This evidence should be definitive and demonstrate why it would make more sense and be more beneficial for your creditors to cut their losses and relieve you of your debt responsibilities instead of pursuing you further to repay them.
If you’re in a situation where you are able to repay your debts but are severely struggling to do so, you may still be granted a debt write off.
This would, though, be in an indirect method, usually through an insolvency solution.
Insolvency plans are formal agreements you arrange with your creditors to pay back your debts over a specific time period.
For many of them, if completed successfully, it can result in a large portion of your debts being written off.
Read each one carefully to see which ones, if any, could apply to you:
Debt relief orders are most applicable for those either on a low income or possess very few valuable assets.If you’re granted a DRO, your debts will be frozen for a year to give you a chance to improve your financial situation.
If financially you’ve remained stagnant after the year, and thus you are still unable to pay your debts, you will likely be eligible for your debts to be partially or fully written off.
If you’d prefer a quick summary, IVAs are legally binding agreements between you and the people you owe money to (your creditors) which last on average, 5 years (but this period of time can be completely dependent on an individual’s agreement).
If you are consistent with your monthly payments and finish your agreed IVA term, you will qualify for the remainder of your debts to be completely written off.
On average, IVA’s have written off between 50% and 60% of an average debt amount of £60,000, resulting in a £25,000-£30,000 reduction in the total amount previously owed.
Therefore, if you plan strategically and are dedicated to meeting your monthly repayments, you may be able to write off a significant chunk of your debts.
However, before being approved for an IVA, you must be able to evidence that you will be able to consistently meet monthly repayments over your agreed time period.
At the time of writing this article, creditors will expect at a minimum £70.00 a month to contribute towards your IVA.
Alternatively, some people, if they have the option, may prefer to provide a lump sum upfront (like a deposit) as a way to reduce their monthly repayments.
Once an agreement has been reached, all previous interest and charges on your debts will be stopped, and your creditors will be prevented from enforcing further penalties against you, including a petition for your bankruptcy.
The most important thing to remember about IVAs is that they are legally binding, meaning once you’ve signed one, there are likely to be harsh penalties for defaulting or cancelling it.
If your IVA fails, you may end up wasting a lot of time and money in fees, so it is imperative that you comply with your IVA throughout the entire agreed term.
Arguably the most well known type of insolvency; bankruptcy, if successful, will write off all your debts that are permitted to be included in a bankruptcy order.
These will include almost all consumer debts such as credit cards, personal loans, overdrafts and car loans as well as utility arrears, to name a few.
However, it is important to note that there are also many types of debt which a bankruptcy cannot relieve you of.
These include: child maintenance arrears, criminal fines, fraudulent debts, mortgages or debts secured against your home, social fund loans, student loans, court-ordered loans and TV licence arrears.
If you have any assets of value, they’ll be assessed to see if they can be used to pay off your debts.
You’ll usually be able to retain essential tools or equipment which you might need to generate your income, such as your toolkit if you’re a tradesperson or car if it’s absolutely necessary for you to travel to work.
So, yes, having your debts written off is very much possible.
However, despite being freed from repaying them, a harsh penalty on your credit file will ensue.
To ensure getting your debts written off is the correct financial strategy for you, it is always strongly recommended that you discuss it with an expert first.