Dealing with several creditors together is a big hassle, especially if you don’t have the money to pay back your debts.
In such a situation, an IVA can be a good debt solution to your problems.
If you have questions about what is an IVA, you’ve come to the right place for advice.
Let’s dive right in.
What is IVA?
An Individual Voluntary Arrangement (I V A) is a legal contract agreement between you and your creditors to pay back your debt over a specified period of time. This agreement consists of monthly payments, usually lasting up to 5 years.
The amount on the monthly payment is determined by the creditors. An IVA is a debt solution in which you are required to pay any money that you have in excess of your living costs directly to an insolvency practitioner who then distributes your money to your creditors.
If your agreement fails, your lenders can go to court against you. This is why it’s important that you consult a professional and take his advice on whether or not you should take up the deal.
Usually you can find free advice too on some web forums and on the UK National Debtline. Just make sure to take professional advice (potentially for free!) before entering an agreement that could stretch over 6 years.
How Long Does it Usually Lasts?
There is no legal upper limit on the duration that all IVA last. The duration of this period is up to the creditors making the agreement with their debtors. However, as a standard, an IVA usually consists of 60 monthly payments.
Each monthly payment is to be paid to your insolvency practitioner on time. Otherwise, you’ll risk losing your IVA.
Why Does Your IVA Extend?
An IVA usually extends for a number of reasons. The most common reason is that you’ve missed a monthly payment and are required to pay it back later after your agreement has ended.
This is important because if you miss a monthly payment or can’t pay the minimum amount on your IVA, your creditors will lose trust and you will risk failure of the agreement.
In such a situation, reach out to your insolvency practitioner as any IVA information or advice can be obtained from him.
What can You Do When Your IVA is Extended
If your IVA is extended because of missed payments, the only way of getting out of the agreement is to pay the scheduled payments in full and make the IVA end. Usually, an IVA is ruled by the Financial Conduct Authority and court action can be taken if the IVA fails.
How to Pay an IVA Earlier?
Just like there are ways to delay an IVA agreement, there are ways to end it earlier as well. Let’s discuss 4 options in this case:
Lump Sum Payments
If you get a sudden unexpected inflow of income, you can pay your IVA earlier. This money can come from equity, a lottery or even inheritance.
Money is generated when you release equity which could then go towards your IVA if it is enough to pay your debt in full.
If it is not enough to pay your debt, you have to pay the whole windfall amount to your insolvency practitioner and complete the remaining payments each month.
Keep in mind though that a windfall amount of less than £500 isn’t considered enough to go towards paying your debt and is overlooked entirely.
If you can negotiate the terms of your IVA, you can make it end earlier. For example, you could negotiate the minimum payments on your agreement with your creditors and increase it so that your debt is covered sooner and your debt solution ends early.
On the other hand, you can also show your assets to your creditors and convince them that you don’t have the money to pay the lump sum amount. This way your lenders might even write some amount off from your debt.
You can cancel your IVA as well entirely after talking to your insolvency practitioner and your lenders.
An IVA is usually only cancelled if you are unlikely to be able to pay any more money or if you show the lenders that you might be able to pay more debt back without the IVA.
You can contact your insolvency practitioner and ask him to end your agreement. This is only possible if a prior agreement with your lenders has been reached and they have approved this step.
Selling off an Asset
Selling off an asset or equity can also get your IVA to end earlier than 6 years. Releasing equity means that you sell off some equity to different buyers to raise some money. This is a good way of producing money if you have cash to invest in equity.
However, dealing with equity isn’t easy. Take the advice of professional finance practitioners before you consider investing in equity.
Frequently Asked Questions (FAQs)
Can my IVA Extend Further than 6 Years?
Yes, if you miss your scheduled debt payments, your IVA can go past the 6 years mark.
Should I Pay my IVA Earlier?
Yes, if it’s possible, you should pay your IVA early. This way your IVA will end before 5 years and you won’t even have to go to 6.
Does Extended IVA Affect Credit Report?
Your IVA will come on your credit report for 6 years from the day that it was approved. If your agreement is extended, it remains on your credit report for as long as it’s not cleared completely. You can even end your agreement under 12 months.
As good as this agreement sounds, you should still seek some debt advice before entering it.
If you have the financial ability to end your agreement early, pay your debt in full and end the agreement in under 12 months.
If you need more information, my name, email and contact information is provided; you can reach out any time you want.