If you reside in Northern Ireland and are struggling with debt, then an Individual Voluntary Arrangement (IVA) could definitely be an appropriate solution for you.
IVAs are a flexible way of paying off a portion of your total debt while getting the remaining debt written off.
In this post, I’ll be discussing how IVAs in Northern Ireland work and how you can apply for one to help manage your debt.
How does an IVA Work?
An IVA works in Northern Ireland in fairly the same way it does in England and Wales in that it is a formal and legally binding agreement between you and your creditors which states that you will pay off most or all of your debts to your creditors in the form of monthly payments.
You will make these monthly payments for an agreed-upon period of time (typically five years) and at the end of that duration, if any debt is remaining, it will be written off.
The great thing about IVAs as debt solutions is the fact that they are extremely flexible and affordable.
This is made possible by your insolvency practitioner (IP). An insolvency practitioner is the main focal person who handles your IVA from start to finish. They are typically lawyers or accountants and are licensed by the Insolvency Practitioners Association. Your IP will ensure that you are treated fairly throughout your IVA and will also make sure that you’re only obligated to make monthly payments which you can afford.
In most cases, in order to qualify for an IVA in Northern Ireland, you need to have unsecured debts that total up to at least £15,000.
There is typically no maximum or minimum level of repayments you have to make. It’s typically the IP’s job to strike a balance when it comes to your monthly payments between what is affordable to you but also acceptable to your creditors.
What are some Pros and Cons of an Individual Voluntary Arrangement?
When you’re looking at debt solutions, weighing out their pros and cons can really help you get a better perspective on whether a certain debt solution would be right for you or not.
Some benefits of it are:
- You won’t have to deal directly with your creditors. Once your IVA is approved, you’ll only have to make payments to your IP every month. Your IP is the one who will deal with your creditors and distribute your payment between them each month.
- Your IP will provide you with information and advice to ensure your IVA is a success. Your IP will also make sure you’re treated fairly throughout the process.
- You can get a significant amount of your debt written off.
- Interests and additional charges on your debts are frozen when you enter into an IVA.
- An IVA prevents your creditors from taking further legal action against you (such as attempting to make you bankrupt).
Some pitfalls of it are:
- IVAs last a fairly long time. Most standard IVAs last five years. Furthermore, if your circumstances change and/or if you miss payments, then this duration could be extended up to six years.
- IVAs place heavy restrictions on your spending which you’ll have to abide by for its entire duration. For example, you’re not allowed to obtain credit of more than £500 without your IP’s permission when you’re in an IVA. Going against any of the restrictions placed on you could cause your IVA to fail.
- IVAs have a severely negative effect on your credit rating. Please note that an IVA stays in your credit file for six years even if your IVA ends in five years or earlier.
- Your name is placed within the Northern Ireland Insolvency Register (or Northern Irish Insolvency Register).
What are the Costs Involved in an IVA?
Your IP will charge you a fee for setting up meetings and negotiating with your creditors as well as managing your Individual Voluntary Arrangement as a whole.
It’s very important that you be thorough with your IP to ensure you have all the information regarding how much your IVA is going to cost.
It’s important to note that your IVA costs will be a part of your monthly payments towards your IVA. You won’t have to pay them separately.
This is something that many debtors appreciate as it makes the entire process fairly streamlined and quite manageable.
Of course, when you’re suffering from debt, you don’t want to be paying fees upfront for debt management services. This is another reason why IVAs are preferred by a lot of debtors.
So, when you make payments towards your IVA, a portion of this will be distributed amongst your creditors (the amount which every creditor gets depends on how much you owe them) and a portion of it will be kept by your IP as part of their fee.
How do I apply for an IVA?
Before you start applying for an IVA, the very first thing you should do is get advice to ensure that an IVA is the most suitable debt solution for you or not.
You can get advice from any debt management company or a debt charity. Be sure to only seek advice from an agency that does not charge you for it.
I recommend that you get information from a debt charity such as Advice NI.
Once you’re assured that an IVA is the best course of action for you to pay back your debt, you should start looking for an IP who would handle your IVA.
You can find an IP for yourself here.
Your IP will then sit down with you and help you develop your IVA proposal.
This proposal will detail your plans on how you intend to repay your debts to your creditors through your IVA.
It will have information regarding your payment plan, your income, your expenditure, your assets as well as your debts.
Once the proposal has been written, your IP will call a meeting with your creditors and present the proposal to them.
In order for your IVA to be accepted, creditors that hold 75% of your debt need to agree to it.
If 75% or more of them agree to your proposal, your IVA will be approved and put in place.
Taking care of your debts may seem difficult but there are a number of options available to you if you reside in Northern Ireland.
Just be sure to seek advice and ensure that an IVA is indeed the best option for the types of debts that you have.