Individual Voluntary Arrangement (IVA) is a debt solution that helps individuals who are struggling with unsecured debts to make affordable repayments over a fixed period of time. It is a legally binding agreement between the debtor and their creditors that allows the debtor to pay off their debts through affordable monthly payments, usually over five or six years. In this article, we will discuss the benefits of an IVA arrangement for debt.
Reduced Monthly Payments
One of the most significant benefits of an IVA arrangement is that it can help to reduce monthly payments. This is because the IVA provider negotiates with the creditors on behalf of the debtor to reduce the total amount of debt owed. Once the agreement is in place, the debtor is only required to make one affordable monthly payment to the IVA provider, who then distributes the funds to the creditors according to the agreed terms.
Protection from Legal Action
Another benefit of an IVA arrangement is that it provides the debtor with protection from legal action. Once the IVA is in place, creditors are no longer allowed to take any legal action against the debtor for the duration of the agreement. This means that the debtor can avoid court action, bankruptcy, or other legal proceedings, which can be stressful and costly.
Debt Consolidation
An IVA arrangement can also be used as a form of debt consolidation. Instead of making multiple payments to different creditors, the debtor can consolidate their debts into one affordable monthly payment. This makes it easier to manage debt, and also reduces the risk of missing payments, which can lead to further financial difficulties.
Freeze on Interest and Charges
Another benefit of an IVA arrangement is that it can help to freeze the interest and charges on the debtor’s debts. This means that the total amount of debt owed does not increase during the duration of the agreement. This can be a significant relief for debtors who are struggling to keep up with high-interest rates and fees.
Improved Credit Score
Although an IVA arrangement will appear on the debtor’s credit report for up to six years, it can still have a positive impact on their credit score. This is because the IVA arrangement demonstrates that the debtor is taking steps to repay their debts, which can be viewed positively by lenders. It also means that the debtor can start to rebuild their credit score once the IVA arrangement has been completed.
Debt Write-Off
In some cases, an IVA arrangement can also result in a portion of the debtor’s debts being written off. This is usually only offered as part of the agreement if the debtor is unable to repay their debts in full. If this happens, the debtor will be required to make affordable monthly payments for the duration of the agreement, and any remaining debt will be written off at the end of the agreement.
Reduced Stress
Finally, an IVA arrangement can also help to reduce the stress and anxiety associated with debt. Once the agreement is in place, the debtor can focus on making affordable monthly payments, without worrying about legal action or harassment from creditors. This can help to improve the debtor’s mental health and wellbeing, and also reduce the impact of debt-related stress on their personal and professional life.
In conclusion, an IVA arrangement can be an effective solution for individuals who are struggling with unsecured debts. It provides a range of benefits, including reduced monthly payments, protection from legal action, debt consolidation, a freeze on interest and charges, improved credit score, debt write-off, and reduced stress. If you are struggling with debt, it is important to seek professional advice to determine whether an IVA arrangement is the right solution for your individual circumstances.
If you need any more guidance – here is a good article on the IVA process – Everything you need to know
