If you have debts that you don’t think you’ll ever be able to repay, an IVA (Individual Voluntary Arrangement) could help. An IVA enables you to repay as much of your unsecured debt as you can afford, and on successful completion your lenders will write off the rest.
IVAs are only available to those who really need them, though. Before you can enter into an IVA, you’ll have to demonstrate that your debts are unaffordable. You’ll also (in most cases) need to show you can commit to regular monthly payments for the duration of the IVA.
How IVAs work
On an IVA, you’ll make regular monthly payments to your IP (Insolvency Practitioner). These payments will be based on how much you can afford after your other essential costs have been taken care of.
This will usually continue for five years, although this can vary (more on this later). On successful completion of your IVA, you will be legally debt-free (as far as your unsecured debts are concerned – an IVA won’t affect secured debts like a mortgage).
But remember: an IVA is a form of insolvency, and as such it’ll have a big impact on your credit rating. It’ll also leave you with very little money to spare, as you’ll be expected to pay as much as you can every month.
Changing the duration of your IVA
As we said earlier, most IVAs last five years. But if you have a good reason for making this longer or shorter, your lenders may agree to it, as long as they can see it’s still going to enable you to repay a reasonable amount of what you owe.
You may be able to change the duration of your IVA while it’s ongoing, if you have any problems sticking to your existing arrangement. This will ultimately come down to what you and your IP can agree with your lenders.
If, for example, you’re temporarily unable to keep up with your payments (e.g. due to a period of unemployment), your lenders may decide it’s in everyone’s interests to give you a short ‘break’ from making those payments – so you can start making them again once your circumstances improve.