An IVA or also known as Individual Voluntary Arrangement is a formal solution which allows you to repay back an affordable monthly payment to your creditors. The term usually lasts five to six years and any remaining debt after this period is written off allowing you to be debt free. It is one of the insolvency acts introduced in 1986 and many people are taking advantage of this Government legislation. In an IVA you gain more control over your assets as opposed to bankruptcy.

The amount you pay each month goes to an Insolvency Practitioner who will split the amount to your creditors. An Insolvency Practitioner is someone that is licensed and will handle your IVA case. Any threatening letters from your creditors (the companies you owe) are completely stopped and the interest and charges on your debts is frozen.

How much you pay per month in an IVA is decided on an initial consultation when going through your Income and Expenditure. Let’s take a look at a typical example below.

Fred who is aged 34 has built up around £16,000 in debt from credit cards, loans, store cards and overdraft. He lives alone and finds it difficult to repay his debts every month. His creditors are now starting to send him letters for his missed repayments and wanting to take further action.

Fred’s Income every month = £1,100
Fred’s Household expenditure = £950 (This is before he pays anything towards his debts)
Fred’s debt repayment to his debts = £480

As you can see Fred clearly cannot afford to pay repay his debts at the rate of £480 per month as his disposable income is £150.

Fred gets in touch and an IVA is a viable option for him.

Once he is in the IVA – Instead of the £480 he originally had to pay back to his debts he will now only have to pay £150 per month for a period of five years. This totals £9,000 therefore the remaining £7,000 will be written off.

Due to this Fred can now focus on his career and not worry about his debt as it is now under control.

Find out today to see if this is a viable solution for you.

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