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One of the most frequently used forms of consolidating debt and managing is applying for an IVA or Individual Voluntary Arrangement. Although it is quite popular, many of us are not aware of some information and detail connected to this debt consolidation and debt management option. There are some major frequently asked questions, which if answered can get us closer to understanding IVA’s.

1. What does an IVA mean?

An IVA (Individual Voluntary Arrangement) is a legal procedure, since 1986, which allows people struggling with major debt elimination problems make a legal agreement with their creditor in order to eliminate debt. By signing an IVA, the main purpose for both sides is to get that agreement, which will be beneficial for the debtor and creditor too. After the proposals are being accepted, creditors will no longer have the option to harass debtors and have to stop further charges and interests on the current debt.

2. What are the benefits of an IVA?

After the creditors accept the terms and offers of the Individual Voluntary Arrangement they cannot charge further interest and rates on the existing debt. There are some main benefits connected to IVA’s, which cannot be felt in the case of filing for bankruptcy. An IVA guarantees a wipe up to 75% off all of your existing unsecured debt, all charges and interests are frozen, homeowners and tenant can also apply. Furthermore, an IVA helps you convert all of your payments into one, monthly affordable payment, and after the successful completion of an IVA, even if the debtor did not actually paid off all existing debts in full, he will be considered debt free.

3. How does an IVA affect my credit score?

During an Individual Voluntary Arrangement you are not allowed to take any further unsecured loans like personal loans, credit cards or store cards. When being in an IVA a note will be put on credit file alerting lenders, which note will remain on your credit file for one additional year after the IVA ends. You might get loans during this one year period, but lenders will certainly give you higher charges and interest rates than in case of a clear credit report.

4. Who can qualify for an IVA?

Every individual owing more than 15,000 £ to three or more creditors, living in Wales, England or Northern Ireland, struggling with debt repayment can apply for an IVA. Another decisive factor in qualifying for an IVA is being self employed, employed or at least having a monthly income.

5. What happens if I cannot pay during an IVA?

Being unable to pay that specific, affordable monthly amount set up in the arrangement can cause difficulties. If you are having IVA repayment problems, you should consult with your insolvency practitioner as soon as possible. Being unable to pay, missing IVA payments can lead to a breach of your agreement. The possibility of the failure of the IVA can easily lead you to bankruptcy in case of not paying on a regular, monthly basis.