Let’s banish the myths about IVAs!
If you’ve never heard of an Individual Voluntary Arrangement (IVA) before, you’d be forgiven for thinking it sounds a bit complex, and if you have heard of one you might have a heard a few untruths about them. We’re here to debunk the myths surrounding this debt solution.
Myth: It’s the best debt solution
Although an IVA can be a suitable way to clear your debts, it isn’t necessarily the best debt solution for everyone. If you speak to a reputable debt adviser and explain your financial situation, they may be able to advise you of an alternative solution to suit your needs. You may find an IVA does work for you but it’s always wise to seek professional advice before agreeing to any debt solution.
Myth: I will lose my home
When you enter into an IVA, you may be asked to release some of the equity in your home, but you won’t be expected to relieve all of it. You may also be asked to remortgage if there is equity available in your home, as your creditors will expect you to contribute more into your IVA.
If equity release isn’t possible, you may be requested to extend your IVA by a further year. This will be explained to you by the Insolvency Practitioner looking after your debt solution.
Myth: I will have to pay expensive fees in an IVA
Regardless of who your IVA is with, there will be fees to pay due to the legal costs incurred in setting it up and managing it. However, here at PayPlan, any associated fees are included in your affordable, regular monthly payments so you won’t need to find any extra money to pay these.
Myth: People will find out about my financial situation
This is unlikely, but possible if people know where to look. Once you enter into an IVA, it will be documented on the Insolvency Register, as well as on your credit file.
Anybody can access the Insolvency Register, but this doesn’t mean everyone will – most people who don’t work in financial services aren’t even aware that the Insolvency Register exists. Your IVA will also be noted on your credit file, which can be looked at by Credit Reference Agencies. This will affect your ability to take out further credit when lenders take a look at your records.
Unless you work in a role where your employer performs credit checks on its employees, your employer will not find out unless you tell them. You may need to disclose this information to an employer if the terms of your employment contract state this, as some industries, like financial services, will not expect you to not be bankrupt or struggling with debt and view their employees entering into debt solutions negatively. Always check your contract and be clear with your employer if your circumstances change.
Myth: Once an IVA has been agreed, the terms cannot be changed
This is not true. If you find your income has increased or decreased, the terms of your IVA can be changed to accommodate this. You will need to inform your Insolvency Practitioner of any changes immediately and they will work with you to amend your plan accordingly.
If you find your income has decreased, your IP will work with you to amend your budget to reflect this, potentially bringing down your monthly repayments. However, this would need to be approved by the majority of your creditors.
If you come into money or find your income has increased during your IVA, you will be expected to contribute a portion of this into your arrangement. You will get to keep some of this new income but your creditors will expect you to increase contributions in your IVA.
Myth: Missing one IVA payment will make it fail
If you miss an IVA payment, your arrangement will not suddenly fail. However, it’s very important that you get in touch with your Insolvency Practitioner straight away if you are struggling with the repayments.
If you continue to miss your payments, you will break the terms of your IVA and your creditors will be able to chase you for all the money owed up front, possibly with interest and fees. This is why it’s best to get in contact as soon as you feel you are unable to cope with the repayments, so a solution can be sought.
Myth: I will not be able to save money
It’s not true that you won’t be able to save. You may need to tighten the belt on your previous budget and it may take you a little longer to save, but your IVA payments will be arranged to ensure you don’t go without money.
Myth: My partner will be affected by my IVA
This is unlikely, but it’s good to remember that creditors will want to understand that you and your partner are both contributing your fair share to the household bills and expenses. They will want to know that you are not paying for your partner’s expenses, thus leaving them with potential payments lost as a result.
Myth: I can’t get an IVA on benefits
If you are on benefits, your creditors will always take into consideration your budget and if they believe you are able to make the repayments comfortably they will agree to the IVA. If benefits are your only source of income however it might be suggested you look at other debt solutions.
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PayPlan offers free and impartial advice to help get you into a better financial position. Talk to one of our advisers today and move towards a better financial future. Call 0800 316 1833 or visit www.payplan.com
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