If you are struggling to keep up your debt repayments you will be pleased to hear that you could write off a chunk of your debt with an IVA. However, there are some strict rules to adhere to and you must be able to demonstrate the level of commitment needed.

What debts will an IVA cover?

An IVA is a form of insolvency and as such you will come to an agreement with any ‘non priority’ lenders. These lenders might include –

•    Credit cards
•    Store cards
•    Personal loans
•    Student loans
•    Overdrafts
•    Catalogue debt

If the borrower and the lenders can agree to the terms of an IVA then they will enter a legally binding agreement which normally lasts for about 5 years. The payments will be based on the absolute maximum the borrower can afford but will still leave room for essentials such as mortgage/rent, utility bills, petrol etc.

It’s an amicable way for lenders and borrowers to work together efficiently. The alternative is bankruptcy and if the lender forced the borrower down this route, they wouldn’t get as much.

Further points to note

•    You have to continue to meet the requirements of the IVA or it will fail and bankruptcy could still be an option.
•    Lenders who own 75% of the total debt must agree to the terms set out in the IVA proposal.
•    An IVA will appear on an individuals credit report for 6 years from the day it starts (which might hinder your chances of gaining further credit).