Thursday, September 29, 2011

Top Five IVA Questions

Top Five IVA Questions Thinking of starting an IVA? We answer 5 key questions that people ask before they begin an IVA debt solution.
The IVA or individual voluntary arrangement can be a very good debt solution to choose.
However before starting an IVA there are a number of things you should consider so that you can be sure that it is the right debt solution for you.

How much will I have to pay to my debts?
The first thing to understand about an individual voluntary arrangement is how much you will have to pay towards your debts each month.
Your monthly IVA payment is based on the amount you can afford, not the amount that you should pay to meet your minimum monthly debt repayments.
You work out what you can afford to pay by first taking your total monthly income including any benefits that you receive. You then deduct your living expenses budget which includes everything you need to pay all of your reasonable living expenses.
The amount you are left with is what you can afford to pay to an IVA.
The only rule is that generally speaking it will be difficult to start an IVA debt solution unless you can afford to pay at least £150 a month to your creditors.
How long will an IVA last?
One of the main advantages of an IVA is that you only have to pay it for five years.
After you have made your payments for five years any debts included in the IVA which you have not been able to repay will be written off and you will not have to pay any more.
You might be able to reduce the amount of time that you pay into your IVA if during the five years you can settle what you owe in full with a lump sum payment.
This lump sum would have to be made available from a third party such as a friend or family member
Some IVAs will last longer than five years however this is unusual.
Will an IVA mean I lose my house?
No you will not lose your house. If you are a homeowner the IVA debt solution gives you protection against any of your creditors taking further legal action which might put your property at risk.
This action could include things like applying for charging orders or even trying to make you bankrupt.
When you start an individual voluntary arrangement you must ensure that you continue to pay your mortgage and any other secured loans.
These debts will not be part of your IVA agreement but you will always be able to afford to pay them as they are calculated within your living expenses budget.
In addition, as a homeowner you need to understand that as part of your IVA you may be required to release equity from your property to help repay your creditors. You need to fully understand this by speaking to a debt expert before starting an IVA.
Will my credit rating be affected?
As with any other debt management solution, if you start an individual voluntary arrangement your credit rating will be made worse.
The fact that you have started an IVA will be recorded on your credit file. This will prevent you from borrowing more money from most high street banks. You may also have difficulty getting things like car finance and a contract mobile phone.
Your credit rating will not start to improve until one year after your IVA finished when the record of the IVA is taken off your credit file.
Although your credit rating will be affected, you need to understand that if you start to miss your monthly debt repayments and take no action this will also have a serious negative effect on your credit rating.
Will my friends, family or employer find out?
An IVA is not publically advertised and no-one will be automatically told that you have started an IVA.
As such, none of your friends, family or employer will automatically find out about your IVA unless you chose to tell them.
However, it is important to understand that as soon as your IVA starts, your name and address will be added to the insolvency register. This is a register of everyone who is in an IVA or has been made bankrupt.
The register is a public document and can be easily accessed via the internet. As such, if someone you know wants to find out whether you are in an IVA, they will be able to do so by going to the register and carrying out a simple search on your name.
Understand what an IVA means for you
An individual voluntary arrangement can mean that you will be free of your unsecured debt after five years.
However using an IVA debt solution is a serious undertaking and before you start an IVA it is very important that you understand all of the implication for your personal circumstances.
In order to do this you should make sure you take advice from an experienced debt advisor who can explain exactly what an IVA will mean for you.

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