How much will an IVA cost me?

If you`re struggling with unmanageable debt and considering entering into an IVA (Individual Voluntary Arrangement) to help you get out of it, you may be wondering what costs are involved.

It`s true that there are costs associated with an IVA - it is a complex legal process, after all - but these will be deducted from the monthly payments you make.

How an IVA works

An IVA is a legally binding arrangement between you and your creditors, in which you can avoid bankruptcy by agreeing to repay a portion of your unsecured debt - if your IVA is approved, your creditors will agree to write off the debt left at the end of the IVA.

Before your IVA can start, you will work with an Insolvency Practitioner (IP) to draw up an IVA proposal. This proposal will then be sent to all of your lenders involved with the IVA, and they will be invited to vote for or against the terms of the proposal. Lenders accounting for 75% of your total debt must approve these terms for the IVA to go ahead.

If the IVA is approved, you will make regular monthly payments to your Insolvency Practitioner, who will distribute the agreed amounts between your lenders. This will normally continue for five years, and on successful completion of the IVA you will be legally debt-free.

What will an IVA cost?

This varies from case to case. Your monthly payments will depend on how much you can afford - how much money you have left after your essential commitments have been covered. This means that you can be sure you have enough to cover your IVA payments and your other costs of living each month. It also means IVAs are only appropriate for people who can commit to making those regular monthly payments.

The IVA fees will be taken from the payments you make. And if you`re a homeowner, you may be required to release some of the equity in your home in the 54th month (half way through the final year) of the IVA.

Finally, bear in mind that an IVA will stay on your credit report for a year after it comes to successful conclusion and this can make further credit harder and/or more expensive to obtain.

Click here for more information on IVAs.

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