What is an IVA and how are they beneficial?

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IVAs are a popular option for people who need an effective solution for their debt, yet many people don’t know what IVA means. IVAs are mutually beneficial for individuals and creditors, as they offer a route to get out of debt, and they enable you to get part of your debt written off. These arrangements are available for residents in England and Wales, and if you meet certain criteria, you can set one up for yourself. In this article, we explain what IVAs are and how you can benefit from one.

What is an IVA?

IVA stands for Individual Voluntary Agreement and describes a type of payment plan that people can set up to avoid bankruptcy. Under such an agreement, an insolvency practitioner compiles all your debts and collects a monthly payment from you to divide amongst your creditors. This is the preferred option over bankruptcy for most people, as it allows you to maintain greater control over your assets. A properly managed IVA can be one of the most effective solutions for people struggling with a substantial amount of debt.

These agreements are formal, and legally binding, so missing payments can have a negative impact. You can typically access an IVA if you have at least 3 debts with 2 or more creditors, but you can’t include student loans, fines or child support.

Benefits of an IVA

The benefits of an IVA can be significant for individuals who are suited to this statutory debt solution. Here are some of the main benefits:

Lower outgoings: Without an IVA, you may be paying huge monthly sums to your creditors, plus interest. With an IVA, you stand to get the vast majority of your debt written off and you can spread your remaining debt over several years, making a single, manageable payment each month.

Consolidate debts: Knowing all of your debts are in one place being progressively dealt with, you can stop worrying about having your debts spread out all over the place. This can be a great weight off your shoulders.

Freeze interest rates: One major benefit of an IVA is the fact that your creditors will freeze your interest rates as soon as your IVA begins. As long as you manage your IVA properly, these interest rates will remain frozen so that your debt only decreases and never increases.

Get up to 90% of debt written off: This is beneficial for obvious reasons. The main draw of IVAs is the fact that you can get a tremendous portion of your debt entirely scrapped.

Stop letters and phone calls: Receiving constant messages from debt collection agencies and creditors can have a terrible impact on the quality of people’s lives. Signing up for an IVA means all letter and phone calls will cease because your creditors will see that you are proactively dealing with your debt.

If you would like some help getting out of debt, or if you would like to inquire about IVAs, feel free to reach out to us.

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