Reducing Debt using Individual Voluntary Arrangements (IVA)

These formal agreements can be worth considering if you can pay typically more than 40 pence in the pound back to your creditors. For example if you owed £100,000 on unsecured loans/cards then you would pay say £40,000. This would be typically paid over a period of five years but these terms can be varied and can be paid back sooner.

The person or company arranging this for you would typically require an upfront fee and then the rest of their fees would be paid out of the monthly instalments within the agreed amount.

There is a strong health warning with IVA’s in that if you suddenly hit a period of hardship and cannot maintain your payments you can be made bankrupt which can be very unfortunate if you have otherwise managed to maintain your payments.

Furthermore many IVA’s require you to have your house re-valued in month 54 in a 60 month agreement and you are expected to find extra money or remortgage your house for part of the increase of the value.

If you cannot achieve this, then you can be made bankrupt right at the end of the agreement even though it may not be your fault and you have maintained all your repayments. It also stays on your credit file for 6 years.

Individual Voluntary Arrangements do however have their place and are worth considering under certain circumstances.

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