An IVA is a formal and legally binding agreement between you and your creditors to pay back your debts over an agreed period. Hillcrest can help you get an IVA in place.

An IVA is set up and managed by an Insolvency Practitioner (IP). It is a form of insolvency which allows an individual to pay back a certain percentage of their unsecured debt in affordable monthly instalments over a fixed term.

Once you enter an IVA, creditors can take no further action against you. However, your credit rating will be affected for six years, and your information will be visible on the public Registers of Insolvencies for the duration of the IVA.

If you live in England, Wales and Northern Ireland, an IVA is an option available to you. Scottish residents can look to enter into a Trust Deed.

Is an IVA a good idea?

IVA are a good idea if you want a legally binding credit payment which has fixed terms and provides added protection on your end. With more affordable payments and protection on your house, it may be the preferred debt solution for your circumstances.

How does an IVA work?

IVAs work by establishing an agreement of debt repayment, at what would be considered an affordable rate. The process involves having an IVA application created by advisors which is then approved by your creditors.

If they are satisfied with the information in the plan and the rate of payment, the IVA becomes legally binding, and your creditors cannot take further action against you.

Can I get an IVA in Scotland?

It is very important to know that IVAs are not available in Scotland. Instead, there are other debt management solutions in place, namely, trust deeds & debt arrangement schemes.

Advantages of an IVA

IVAs are a great solution when you want a legally binding debt agreement in place. Some of the primary reasons around opting for an IVA would include:

  • All interest and charges are frozen
  • No further contact from unsecured creditors
  • You are supervised by your IP who help you prepare
  • Make one affordable monthly payment each month
  • You’ll never be forced to sell your home in an IVA
  • All of your remaining debts will be written off at the end of your IVA not recorded on the insolvency register

Disadvantages of an IVA

While IVAs can help a lot with paying off debt, they do have some disadvantages, or rather hurdles, which may not make an IVA a viable choice for you. Some disadvantages can include:

  • Having pending restrictions put in place for the duration of your IVA
  • Creditors may not approve your request for an IVA. 75% of your creditors need to approve.
  • Not all debts can be included in an IVA. These include student loans, any child support or court fines.
  • If you come into any funds over £500 during the IVA term, they will be introduced into the agreement.
  • If you fail to make your payments, your IVA could fail.
  • Your credit rating will be affected for six years.

Understanding what can and can’t be paid with an IVA

IVAs can confuse some people when looking at what payments can be covered. Typically, taxes and personal loans/credits are included in IVAs, so things like credit cards, tax arrears, and invoices would be there. On the opposite sides, IVAs would typically not be able to cover mortgages, fines and arrears from purchase agreements. Again, with it all too easy to get confused over, we recommend talking to our advisors for clarity on what can and can’t be paid.

Do IVAs have spending restrictions?

Yes. All IVAs have to include a budget, which by its very nature will put spending restrictions in place. While it may be a worry, it is important to note that the budget would take into account essential living costs and bills, so things like electric, car tax etc. are already in your budget.

Does an IVA affect your credit rating?

As an IVA involves having the details of the agreement on a public register (the Individual Insolvency Register) which stay there for the duration of the IVA, it can affect your rating. Credit agencies will keep a record of this information in the event an individual is applying for credit after an IVA. However, it tends to be removed from a credit file after six years.

Is an IVA better than a DMP?

IVAs and Debt Management Plans (DMPs) are two very common debt solutions. It helps to know what each does and what differences they have, as they include payment flexibility and legal status. We recommend reading about debt management plans to learn more.

Get advice on using IVAs from debt experts

Hillcrest Finance can help you figure out which debt solutions work best given your circumstances. You may have come here to get an IVA, but we recommend getting in touch with our advisors to get their thoughts on what practical solutions will work best.
You can call every weekday from 8 am on 0141 478 0862. You can also get in touch via WhatsApp.

Get in touch with us about an IVA today