An IVA (Individual Voluntary Arrangement) is for a set time frame, normally 5 years, where the borrower in debt pays a set amount. If all debts are paid then all debts stated in the IVA will be written off. Which means that the individual will be completely debt-free upon making all the payments agreed. The IVA is a legally binding scheme, designed to safeguard both the borrower in debt and the creditors therefore you should include in the IVA proposal all unsecured debts simply because you won’t get cleared of the debts not stated in the proposal. It’s also fully understood that the IVA is legally binding, consequently repayments should be made and if skipped then the IVA will fail to write off the debts.
When the objective of the IVA is to get rid of your debts, it cannot write off ‘all’ of your debts. A number of debts cannot be included in an IVA including:
- mortgages and loans secured on your property
- Hire Purchase Agreements where you still want the product
- Magistrates Court Fines
- Speeding/parking tickets
- debts incurred through fraud
- spouse maintenance arrears
- CSA arrears
- and arrears on a rental property.
Listed here are the debts that may be included in an IVA:
- bank accounts
- finance company loans
- credit or store cards
- outstanding VAT
- outstanding Inland Revenue debts
- loans from family and friends
- hire purchase
- repossession shortfalls.
Usually in an IVA, the vast majority of creditors permit borrowers to pay back a percentage of the debt they owe the company over a set time frame, generally within five years.
If in massive debt, take care not to just give in to a number of profit making IVA companies that offer an IVA with deceptive claims. A number of companies have adverts proclaiming that their IVA can write off 95% of their debts. Be cautious of these simply because a number of them are false claims and don’t even make clear the fees payable under the terms of an IVA.