If you have considerable debt problems and want to get them paid off within a reasonable time, then you may want to consider an individual voluntary agreement or IVA. Those people who have any assets, such as equity in their home, will find that this could be made available to their creditors.
An IVA is usually set up by an insolvency practitioner who gathers together all of your financial details and then constructs an agreement for the consideration of your creditors. If your creditors agree to the arrangement then both parties sign it and it becomes legally binding; this means that neither you nor your creditors can change your mind about things at a later date. Once the agreement is set up then you will make regular monthly payments to your creditors via the insolvency practitioner. The agreement lasts for five years and at the end of that period, anything that is left owing is written off and you are legally debt free.
With an IVA all of the charges and interest payments on your debt are frozen and you are finally rid of the harassing phone calls and letters from your creditors. If you are a home owner you will be able to keep your home, which you might not with a bankruptcy case, but you would be required to access some of the equity for your creditors.
An equity IVA prevents you from selling your property while the agreement is in place. Halfway through the agreement period you will be required to release the equity in your home and pay some of it to your creditors. It is a requirement of the agreement that you pay some of the equity into the IVA, which may mean remortgaging your home.
Disadvantages of IVAs and Equity Release
It is also possible that creditors can force you to agree to sell your home in order to meet your debts when you are on an IVA, there is also no guarantee that your creditors will agree to an IVA, which means you could be facing bankruptcy. You and your creditors will have the agreement recorded in the personal insolvency record and an IVA, like bankruptcy will remain on your credit file for six years.
Part of all IVA agreements is that if you are a home owner, then halfway through the agreement period you have to get your home valued and then pay most of the equity to your creditors. An alternative to this is a final settlement IVA where you pay 25 percent of your debts from the equity in a lump sum and the debt is settled. Either way you will be required to release some of the equity in your home if you have an IVA.
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Not sure which debt relief option is right for you?
We recommend contacting a debt counselor to discuss your options:
