Bankruptcy or IVA? IVAs as a method of repaying unmangeable debt

Admin June-28-2010 No Comments »

If you are struggling with unmanageable debts that you don’t think you’ll ever be able to repay, but you can commit to making monthly payments at a reduced rate… an IVA (Individual Voluntary Arrangement) may be suitable for you.

An IVA, to put it simply, is a formal agreement between you and your unsecured creditors in which you’ll be required to pay as much as you can afford (per month) towards your debts.

Because an IVA is a formal agreement, once one has begun, you can’t change the terms of the agreement (without your lenders agreeing to it) – and nor can your lenders.

In most cases, an IVA will last for five years (60 months), but this may vary depending on the terms of your particular agreement and your ability to make payments towards your IVA throughout its duration. Once your IVA comes to a successful close (i.e. once you have made your final scheduled payment), your creditors will write off the debt you couldn’t afford to repay and you’ll be legally debt free.

Of course, as with any debt solution, there are several things you need to consider before entering an IVA. For example:

Entering an IVA will have a lasting impact on your credit rating – it will be displayed on your credit report for six years from the time it starts, which will make it harder and/or more expensive for you to obtain credit.

If you are a homeowner, you may be required to release some of the equity in your property during the final year of the agreement. This money will be used to repay more of your debt.

An IVA may only be suitable for you if you are struggling with an unmanageable level of unsecured debt that you can’t afford to repay within a reasonable period of time, but that you can commit to making reduced monthly payments towards.

This IVA FAQ document might come in handy if you want to learn more: http://www.thinkmoney.com/debt/IVA/iva-faqs.asp

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