An Individual Voluntary Arrangement (IVA) can be a very good debt solution to choose. However before starting there are a number of things you should consider so that you can be sure that it is the right option for you.

We answer 5 common questions that you will probably be keen to ask before making the final decision to move ahead.

1. How much will I have to pay in an IVA?

The first thing to understand about an IVA is how much you will have to pay towards your debts each month. Your monthly payments are based on the amount you can afford, not the amount that you should pay to meet your minimum monthly debt repayments. This is known as your disposable income.

You work out your disposable income by taking your total monthly income and deducting your living expenses budget. The amount you are left with is your disposable income and you will be expected to pay all of this into the Arrangement each month.

BMD Tip: Generally speaking it will be difficult to start an IVA unless you can afford to pay at least £100 a month to your creditors.

2. How long will an IVA last?

One of the main advantages of an IVA is that you only have to pay it for a fixed period of time (normally 5-6 years). After you have made all of your agreed payments any outstanding balances will be written off and you will not have to pay any more.

You might be able to reduce the amount of time that you pay if during the Arrangement you can settle what you owe in full with a lump sum payment. This lump sum would have to be made available from a third party such as a friend or family member

BMD Tip: Some IVAs will last longer than five years. Most commonly the arrangement could be extended by 12 months if you are a home owner and cannot release equity from your property. However it is also possible for your creditors to demand that the arrangement lasts longer than 5 years in certain other circumstances.

Do you want help to start an IVA? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

3. Will an IVA mean I lose my house?

No you will not lose your house. If you are a home owner an IVA gives protection against any of your creditors taking further legal action which might put your property at risk. This action could include things like applying for charging orders or even trying to make you bankrupt.

While you are in the Arrangement you are still responsible for paying your mortgage and any other loans secured against your home. These debts are not included but you will always be able to afford to pay them as the necessary allowances are made for this within your living expenses budget.

However as a home owner you need to understand that as part of your Arrangement you may be required to release equity from your property to help repay your creditors.

4. Will an IVA affect my credit rating?

As with any other debt management solution if you start an IVA your credit rating will be made worse. The fact that you have entered into the agreement will be recorded on your credit file which will prevent you from borrowing more money from most high street banks. You may also have difficulty getting things like car finance and a contract mobile phone.

Your credit rating will not start to improve until one year after your Arrangement is finished when the record of it is taken off your credit file.

BMD Tip: Although your credit rating will be affected you should remember that if you start to miss your monthly debt repayments and take no action this will also have a serious negative effect on your credit rating. As such worrying about the affect it will have on your credit rating should not be a primary reason for not starting an IVA.

5. Will my friends, family or employer find out about my IVA?

An IVA is not publicly advertised and no-one will be automatically told that you have started the arrangement. As such none of your friends, family or employer will automatically find out unless you chose to tell them.

However, it is important to understand that as soon as the agreement starts your name and address will be added to the insolvency register. This is a register of everyone who is in this type of Arrangement or has been made bankrupt.

The register is a public document and can be easily accessed via the internet. As such, if someone you know wants to find out whether you are in an IVA, they will be able to do so by going to the register and carrying out a simple search on your name.