Product Description
An IVA is a legally binding contract between you and your creditors which allows you to pay back a percentage of your debts over the course of 5 years. An initial proposal is drawn up by a qualified insolvency practitioner and assuming your creditors accept the proposal, it is processed through your local County Court and entered into the system. An IVA is seen as a less severe road than bankruptcy but which still leaves you debt free at the end of the terms, which are normally between three and five years.

The Main Players
There are plenty of independent insolvency practitioners advertising on the internet however the big names in this field include Debt Free Direct, National Debt Relief and Debt Matters. These three handle the majority of IVAs in the UK and have the resources to help in most situations.

Pros of an IVA

• Once your IVA has been approved, your creditors can not demand additional payments. In fact they can’t even contact you to ask about payments.
• At the end of the IVA term, which is normally five years for large debts, you are officially debt free.
• In some circumstances you can rite off over 75% of your outstanding debts.
• You make one affordable payment into your IVA fund each month, the amount of which is carefully calculated by your IVA supervisor so you don’t go short.

Cons of an IVA

• The contract is legally binding which means if you default on your payments your creditors can declare you bankrupt.
• An IVA will affect your credit rating and you are banned from taking out any form of credit for the duration of the agreement. It will also make borrowing difficult in the future.
• You have to watch your spending and keep control of your finances for five years. Annual reviews will pick up any changes in your circumstances so any increase in income will mean an increase in your payments, and there is no way to hide this.
• If you have considerable equity in your home or valuable assets you may be asked to relinquish them to pay part of the debts owed.

Things to Consider when Choosing a Provider
Many of the main IVA specialists offer similar services however there are one or two important points that you will want to check on. Firstly you should check how their fees are paid. Some practitioners expect you to pay their fees separately and this can mean paying your IVA payments for a number of additional months after the terms have ended. Others however take their fees from the IVA account which means that they are taking the money from your creditors and not you. This means your creditors get less at the end of the term but they will agree to this in the initial proposal. You should try to use this type of insolvency practitioner as it will save you thousands in additional fees.

Secondly you want to choose a company who give you ongoing support. Some of the smaller insolvency firms only get in touch when your annual review is near and at any other time they are hard to get hold of. Your IVA supervisor should be reachable for any problem – from a creditor asking for money to you loosing your job – and if they aren’t then there should at least be a customer support team available to help.

BUYability Summary
While an IVA is a severe step to take with regards to debt management, it is still better than bankruptcy. You will be declared debt free within 5 years and your credit history is not blacklisted for life. An IVA is legally binding though and any non-payment can still lead to bankruptcy. If you are in serious debt that you can no longer pay then this might be your best solution.