The individual voluntary arrangement, or IVA, is a kind of debt solution available to UK residents. It is a formal, legally binding agreement between you and your creditors to repay your debts over a set period of time, usually five to six years.
To be eligible for an IVA debt, you must owe at least £7,000 to two or more creditors, be unable to repay your debts in a reasonable amount of time, and have a steady income that can cover your monthly repayments.
If you are struggling with debt and are looking for a way out, an IVA may be the right solution for you. In this article, we will explain everything you need to know about IVAs, including how to get out of one quickly.
How an IVA works
An IVA is a formal agreement between you and your creditors where you agree to make regular payments towards your debts. These payments are usually for a period of five to six years, after which any remaining debt is written off.
Your IVA proposal will be prepared by an Insolvency Practitioner, who will negotiate with your creditors on your behalf. The proposal will include details of your income, expenditure, and assets. The Insolvency Practitioner will then present the proposal to your creditors, who will have the opportunity to vote on whether or not to accept it.
If the proposal is accepted, you will make monthly payments to the Insolvency Practitioner, who will distribute the money to your creditors. You will also be required to adhere to certain conditions, such as not taking on any new debt without permission from your Insolvency Practitioner and notifying them of any changes to your income or expenditure.
Once you have completed your IVA, any remaining debt will be written off, and you will be debt-free.
Pros and cons of an IVA :-
Pros :-
- You will have a legally binding agreement in place with your creditors, which means they can no longer chase you for payment or take legal action against you.
- Your debt repayments will be more manageable, as they will be spread out over a longer period of time.
- Any interest and charges on your debts will be frozen, which means you will not have to pay more than you owe
- You will avoid bankruptcy, which can have serious consequences for your personal and professional life
Cons :-
- Your credit score will be affected, and you may find it difficult to obtain credit in the future
- Your IVA will be recorded on a public register, which means it will be visible to anyone who searches for it
- You will have to adhere to certain conditions, which may restrict your financial freedom
- If you fail to make your IVA payments, your creditors may take legal action against you, which could lead to bankruptcy
How to get out of an IVA quickly
If you are currently in an IVA and wish to get out of it quickly, there are a few options available to you:
- Make a lump sum payment If you come into some money, such as an inheritance or a bonus from work, you could use this to make a lump sum payment towards your IVA. This will reduce the amount of time you need to be in the IVA and could save you money in the long run.
- Remortgage your property If you own your home and have enough equity, you may be able to remortgage to release some of the equity to pay off your IVA early. This will mean you will no longer have to make monthly payments towards your IVA.
- Ask for a settlement figure You could contact your Insolvency Practitioner and ask for a settlement figure. This is the amount you would need to pay to settle your IVA in full. If you have the funds available, this could be a quick way to get out of your IVA.
- Consider bankruptcy If you are unable to make your IVA payments and do not have any other options, you could consider bankruptcy. This will end your IVA and any remaining debt will be written off. However, bankruptcy has serious consequences, so you should seek professional advice before making any decisions.
In conclusion, an IVA can be a great way to get out of debt and regain control of your finances. However, it is important to fully understand the pros and cons before agreeing. If you are currently in an IVA and wish to get out of it quickly, there are options available to you, but you should seek professional advice before making any decisions.