# Do You Understand What an IVA Is?

IVA stands for Individual Voluntary Arrangement. It is an arrangement you come to with your creditors when you cannot sustain payments for the level of debt you have. This can happen for many different reasons, for example, suddenly something happens, and people find their income does not cover their outgoings. This situation can cause much worry and stress, but before making a decision about if this is the way forward for you, do you understand what an IVA is?

### What Is An IVA?

An IVA is a legally binding document that once in place has to be abided by, and your creditors cannot take any other legal action against you. The government introduced them as an alternative to bankruptcy and can be used for individuals, or a similar agreement called a CVA can be used for businesses. Although you may be advised that an IVA is the best way forward for you, 75% of the value of money owed has to be agreed as your creditors will lose money, just not as much as they would if you were made bankrupt.

So, what is an IVA? Your finances are looked at closely to see how much you can realistically afford to pay each month, and that amount then has to be paid every month for five years. However much that amounts to is split between your creditors on a percentage basis, so who you owe the most to gets a bigger proportion of the money. Any of the debts left after five years are written off. This is often 50% of the total money that was originally owed but can be as much as 70%.

Your unsecured debts have to total more than £6000, and you have to have at least two creditors for an IVA to be a viable option.

### Safeguarding Assets

One of the biggest advantages of an IVA is that you will not be forced to sell your home as you could be in a bankruptcy. If there is any free equity, you can be asked to release that to reduce the debts, but your home will be safe as long as you keep up the monthly payments as agreed.

Any other assets could be a different matter, and you may be asked to sell them to reduce the debts unless they are necessary for you to perform your work, and so earn your living.

### Putting You on the Road to Financial Recovery

Once an IVA has been agreed, you can get on with your life without much of the stress the financial problems have been causing you. As long as you maintain that monthly payment for the five years, you will be on the road to financial recovery. The IVA will show on your credit records, making it difficult to borrow money for the 6 years it stays there, but for most people entering ones of these agreements, the relief they feel is worth it. Most of them have no intention of borrowing again, as they do not want to consider going through the same stress debt can cause for a second time.

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