Before making your final decision to start an Individual Voluntary Arrangement (IVA) it is important that you remember some key advice about how an IVA is likely to affect you.
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Other Debt Solutions might be suitable
An IVA is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply for an IVA you should also consider the other available debt solution options.
IVA payments last for 5-6 years and can increase
You will need to make monthly payments towards your debts based on your disposable income for 5-6 years (unless you settle early with a cash lump sum).
During this time all interest and additional charges are frozen. Remember your payments may increase if your income improves or your expenses fall.
After your payments are completed any debt included in the Arrangement that remains unpaid will be written off.
Payment of your Priority Debts
Only unsecured debts which are highlighted in your IVA will be included. Any unsecured debts which you leave out either by choice or mistake will remain outstanding.
Secured debts such as your Mortgage are not included. You must maintain your monthly payments towards your secured debts even after you start an IVA. If you fall behind you will risk the property being repossessed.
You must also maintain payments towards your other priority debts such as rent, fines, child support payments and utility bills. If possible you should also continue to pay any CCJ debts until your IVA is accepted.
Your credit rating will be negatively affected for 6 years
An IVA will have a significant negative impact on your credit rating. A record of the Arrangement will remain on your credit file for 6 years.
During this time and possibly for some time afterwards your ability to get new credit, a new mortgage or other financial services will be seriously affected.
Your Details will be included in a Public Register
Once you start an IVA your name, date of birth and address will be added to the Insolvency Register. This register is publicly accessible and via the internet.
As such anyone could discover that you are in an IVA if they search the register for your name. Once your IVA is completed your name and details will be taken off the register.
Your living expenditure will be restricted
During your IVA you will be required to live within a restricted living expenses budget. You will have to pay all of your surplus income into the Arrangement.
If your income increases or your expenses fall your monthly payments may also increase.
Home equity may have to be released
If you are a home owner you will be obliged to release equity from your property in the last year of your IVA. If equity is available you will need to consider the options of both remortgaging or taking a secured loan.
Where equity is available but you are unable to release this it is likely that your IVA will be extended for 12 months instead.
Your IVA may not be accepted
The lenders you include in your IVA are not obliged to accept your proposal. It will only be accepted if 75% in value of the creditors who actually vote on the proposal agree to it. If your IVA is not agreed you will remain liable for the payment of your debts.
What if you do not maintain your IVA payments?
If you start an IVA but do not keep up your agreed payments it is likely to fail unless a revised payment schedule can be agreed with your creditors.
If your IVA fails it is possible that you will lose all the money that you paid into it. Your debts will remain outstanding. You will then have to start another IVA or choose a different solution.
In rare circumstances it is also possible that your creditors will petition for your Bankruptcy.
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