Individual Voluntary Arrangements (IVA)
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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”
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“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”
Before continuing with this article, it is strongly recommended that you read our foundational IVA articles (if you haven’t already) in order to give you a solid understanding of what they are and how they work.
In addition to IVA’s being an effective way to repay debt, did you know that they’re also capable of writing a significant amount off your debts as well?
Depending on your individual circumstance and if you’re strategic with your repayment plan, an IVA can help you write off potentially thousands of pounds.
This article will outline how exactly debts as part of an IVA are written off and what kinds of debts are eligible to do so.
If your memory needs a quick jog, here’s a reminder as to what IVAs are and how they work (you can skip over this paragraph if you’re already knowledgeable about this).
IVAs are legally binding agreements between you and the people you owe money to (your creditors).
The length of most IVA plans is, on average, 5 years (but this period of time can be completely dependent on an individual’s agreement).
As a result, you must be able to prove that you can consistently meet monthly repayments over your agreed time period.
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.
So, if you are having trouble repaying your debts, an IVA can be a flexible and individualized solution to take back control over your finances in the way of a formal and affordable repayment plan.
At the end of an IVA arrangement, depending on the amount you initially owed to your creditors, the rest of the money you owe will be written off and you won’t have to pay the rest.
An average IVA period in the U.K. typically spans over a 5 year period, but this can widely differ depending on your individual circumstance.
It is first important to note that the amount of debt you might be able to write off at the end of an IVA is completely dependent on an individual’s circumstances, so you should take these averages with a grain of salt.
Most people who engage in an IVA can write off between 50-60% off an average debt of just under £60,000.
As a result, a typical IVA would reduce the money you’d owe your creditors to just £25,000-£30,000.
It is recommended that you are cautious as to claims from some IVA or debt management organisations who state that they can write off as much as 90% of your debt after a successfully completed IVA.
Whilst this is of course possible, it is usually only available in very nuanced and extremely rare cases.
Before agreeing to an IVA, you must know what kind of debts can and can’t be included in your arrangement.
The most common types of debt written off after its end date are the different variations of consumer debt and personal loans; such as overdrafts, credit cards, payday loans and store cards.
After consumer and personal type loans, tax based arrears are the next most frequent form of debt that are included in IVAs.
These include gas, council tax arrears, electric arrears, water arrears, income tax and national insurance arrears.
Even debts to friends and family and other broader outstanding bills like solicitor’s costs, vets bills and invoices for construction work can be included in your IVA repayment plan.
Loans which use an asset as security, known as secured loans, such as your house for your mortgage payments are not covered in IVA repayment plans.
This is further extended to other types of secured loans such as business loans and rent arrears.
Although your creditor can grant you permission to include them, it is highly unlikely as your mortgage lender already has your property as security which they can sell in the more extreme case of bankruptcy.
It should be first noted that IVAs are usually only suitable for those with larger debt amounts, typically above the £15,000 threshold.
In terms of quantity, there is no minimum or maximum limit of your debt which can be covered in your IVA, as set by the law.
However,IVA fees that you pay to your Individual Practitioner are high.
Therefore, if your total debt is less than £15,000, an IVA might not be suitable for your situation, and it might be best to research into other debt solutions.
In summary, IVA’s can certainly be a very practical solution to significantly reduce the total amount of debt you owe to your creditors.
In some instances, you could be relieved of thousands of pounds, so it’s worth considering and checking with an IP or expert first to see if this is possible for your situation.
However, in order to write off your debts via an IVA, you must successfully complete your repayment plan, which means meeting your IVA payments each and every month for your agreed term. If you fail to do so, your IVA may fail, meaning your creditors could decide to pursue you further legally and petition for your bankruptcy if you can’t organise a different way to adequately compensate them.