If you are struggling with your unsecured debts, and don’t think you’ll be able to repay them… an IVA (Individual Voluntary Arrangement) may be right for you.
An IVA (www.iva-forum.com) is a formal financial agreement between you and your unsecured creditors in which you agree to repay a portion of your debt (as much as you can) over an agreed timeframe.
To be eligible for an IVA, you must (in general) be able to commit to making reduced monthly payments for five years. You will be debt free (although your secured debts, like mortgages, won’t be written off) once the IVA has drawn to a successful close and your unsecured creditors have written off the debt you couldn’t afford to repay during the IVA.
So, if you’re thinking of entering an IVA, you should check out some of the pros and cons of the solution. We’ll take a look at some of these now:
Pros
* Because an IVA is a legally binding financial agreement, your creditors won’t be allowed to change their minds or take any further legal action regarding the money you owe to them (that is, providing you stick to your side of the agreement, of course).
* Entering an IVA means you can avoid some of the downsides associated with being declared bankrupt – such as potentially losing your home and being barred from certain jobs.
Cons
* While your IVA is underway, you will be left with very little spare money each month – this is because you’ll be expected to pay as much as you can afford towards your debts.
* Because an IVA is a serious financial commitment, it probably won’t be right for you if you’re not sure you’ll be able to make your monthly payments.
* If you enter an IVA, and you’re a homeowner, you may be required to ‘free up’ some of the equity in your property during the 54th month of the agreement. This money will be used to repay more of your debt.
* It’ll have a serious impact on your credit rating for six years.