There are various effects of an IVA. Their impact on you will depend on your financial and family circumstances.
- The affect of an IVA on your Debt
- What happens to your Credit Rating?
- What happens to your Belongings?
- Who will find out you have started an IVA
The Affect of an IVA on your Debt
An IVA allows you to settle unsecured debt that you cannot pay. You make reduced payments for an agreed length of time. After this as long as you have met all of your obligations any outstanding balances are written off.
Secured debts cannot be included. Things like your mortgage and a car finance still have to be paid. It is important that you provide a sufficient amount to cover these monthly payment in your living expenses budget.
If you are paying monthly the Arrangement will normally last for 5-6 years. However it may be possible to settle early if you are able to pay a lump sum. You could also consider a one off Lump Sum Payment IVA.
Only debts specifically listed in your IVA agreement are included. If you miss any out or take on new debt after the start date you will be liable to pay these in full.
How does an IVA affect your Credit Rating?
After it has started a record of your IVA is put on your credit file. This remains there for 6 years even if you settle the Arrangement early.
As a result your credit rating will become worse. While the record is on your file you will find it difficult to get most forms of unsecured and secured credit.
You will be allowed to maintain some credit facilities such as a pay monthly mobile phone or car insurance. However you may find it difficult to renew these agreements unless you stay with the same provider.
It is possible to borrow money during an IVA especially from a Payday loan company. However you should avoid this. If you have a financial emergency speak to your Arrangement provider.
What Effects will an IVA have on your Belongings?
Generally speaking the effects of an IVA on your personal belongings will be minimal. You are allowed to keep all of your household items including your furniture, electrical goods, mobile phone and laptop.
You will usually be able to keep the car that you own. If it is on finance then you will be able to include a provision to maintain your payments in your living expenses budget.
If you are a home owner your property will be affected. It gets legal protection from your creditors. However you will be required to release equity where possible to increase the amount you pay back to your creditors.
If you have a car lease agreement which finishes during an IVA your poor credit rating will mean it is difficult to finance a new vehicle. You will need to plan for this.
Who will find out about your IVA?
An IVA is a private agreement between you and your creditors. The fact that you have started the agreement is not published and no-one other than your creditors is told. As such your friends and family are unlikely to find out.
Having said that a record is included in the Insolvency Register. This is publicly accessible via the internet. As such it would be possible to search on your name and discover that you are in the Arrangement.
You cannot just scroll through the list of people on the Register. You must search on a specific name. Given this it is unlikely that someone will just stumble upon your name and discover your circumstances.
Most jobs are unaffected because your employer is not informed. The only way they are likely to find out is if you tell them or they carry out a credit check against you which would be unusual.
Government Advice about Dealing with Debt
As well as the information found on this website the Government’s Insolvency Service has produced a useful guide to personal debt solutions which you might also find useful: “Options for paying off your debts”.
The Money Advice Service (MAS) are an independent service set up by the Government to provide people with free advice about all aspects of personal finances. For help from MAS if you are struggling with debt please follow this link: MAS – Help if you are struggling with debt.
It is also recommended that you read this one page document produced by MAS entitled “Dealing with debt – 5 things you should know”.