An IVA can be a more flexible arrangement than bankruptcy, but it’s not suitable for everyone. If you want an IVA, you must meet certain criteria, not all debt is covered, and there are some risks involved.
What is an IVA?
An IVA is an Individual Voluntary Agreement. It is a formal and legally binding agreement made between an individual and their creditors to pay back debts over a set period.
An IVA can be more flexible than bankruptcy, but it can also be expensive. An IVA must be set up by a qualified insolvency practitioner who will usually charge a fee. You make repayments to the insolvency practitioner who then distributes money to your creditors.
Why choose an IVA?
An IVA is more flexible than bankruptcy as you may be able to keep assets such as a car or loan, and you can continue to use your bank account. An IVA could be a better option than bankruptcy if you:
- Own your home
- Own a business
- Will lose your job if you go bankrupt
- Have spare income each month or a lump sum from which you can make repayments
If a creditor is threatening to make you bankrupt, getting an IVA may help you avoid the bankruptcy.
Who can get an IVA?
Not everyone is eligible for an IVA, but if you owe money to two or more creditors and your debt totals £10,000 or more, it could be an option.
You must have a regular income and be able to make payments each month. If your income is unpredictable, then an IVA might not be right for you.
You can also make payments from lump sums, equity released from your home, defined contribution pensions, and profits from sales of assets, but you should get financial advice if you intend to do this.
What debts are covered by an IVA?
An IVA covers most debts, but they are usually taken out to cover bank loans and overdrafts, credit and store cards, personal loans and similar debts. You can also include priority debts such as tax arrears and utility debts. Secured loans, such as mortgages, can be included with the creditor’s permission. Debts such as child support and court fees cannot be included.
Is an IVA right for you?
If you don’t own your own home bankruptcy could be a better option, but it is important to get professional advice before you go down either route. Your creditors may not agree to an IVA, and if they do agree but it doesn’t work out, they could make you bankrupt.
If you are in debt and are struggling to manage it, then you should seek independent advice. Your local Citizens Advice Bureau is a good place to start.
About Morses Club
At Morses Club, we understand that feeling out of control when it comes to money can be tough. We offer small cash loans, also known as doorstep loans, to help with those unexpected costs. Doorstep loans aren’t right for everyone, and you should only borrow what you can afford to pay back. If you would like to find out if a Morses Club loan is right for you, then read our FAQs for more information.