What is a Debt Relief Order and how does it work?
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An IVA can write some debt off, but not all. Learn more here.
Unmanageable debt can cause a lot of stress, especially if you think that you won’t ever be able to afford to pay back everything you owe. You might have heard about Individual Voluntary Arrangements (IVAs), and that they can allow you to get some debt written off. But how does this debt solution actually work?
Can I get debt written off with an IVA?
It is possible for you to have some of your debt written off with an IVA, as long as you qualify for the solution and complete it successfully.
IVAs were introduced as a solution for people who can afford to pay back some of what they owe, but not everything. They’re only available in England, Wales and Northern Ireland. If you live in Scotland, a Trust Deed is a debt solution that offers similar benefits.
You may have heard that you need a certain amount of debt in order to qualify for an IVA but this isn’t the case. It’s more about whether the solution is right for your particular circumstances – a debt advisor will be able to tell you if an IVA is the most suitable option for you. If you are a homeowner you will usually be able to keep your home on an IVA, although you may be expected to try to release equity and put the money towards your IVA.
An IVA normally lasts for five to six years and during that time you pay an affordable amount towards your unsecured debts each month. Your payments are worked out so that you still have enough money to keep up with your secured repayments (for example your mortgage if you have one) and other essential bills and living expenses. It’s classed as a formal solution which means that it’s legally binding for both you and your creditors, so you’ll be protected from any further legal action once the agreement has been signed.
When your IVA finishes, as long as you have kept to the rules of the agreement, any remaining debts included on the plan are written off, along with any interest and charges.
Are there downsides?
There are pros and cons to an IVA, as there are with all debt solutions. For instance, your credit history will be affected by the solution for six years from the date that you start it and you may find that it’s harder or more expensive for you to borrow money or apply for certain services in the future.
It’s also really important that you put as much money towards your debts as possible while your IVA is ongoing. So this means sticking to the IVA budget agreed with your creditors, and in some cases putting money from windfalls and extra earnings towards your debts.
Find out more
If you want to find out more, have a look at our comprehensive guide to IVAs. There are other debt solutions available which might suit you better depending on your circumstances. Some offer debt write-off, suspend your payments altogether or simply lower your payments so they’re affordable. To find out more about them and which one is right for you, make sure you get in touch with a trained debt advisor.
by Christine WalshBack to blog home