Seven common IVA myths and the truth behind them
When it comes to finding debt help there’s a wealth of information at your fingertips.
From understanding your income and expenditure to learning about the range of different solutions available, there’s a lot to get your head around.
However, the most important thing when seeking advice is to make sure the information you get is reliable.
Making the decision to enter a debt arrangement is one that shouldn’t be taken lightly, and you need to ensure you have all the facts to make an informed decision.
Here we shine a light on the seven most common myths surrounding the Individual Voluntary Arrangement (IVA) and the truth behind them.
An IVA is an ‘easy’ option and available to anyone
Entering an IVA isn’t a quick fix or an easy way to write off debt you can’t afford. It is a legally binding debt solution that can last up to six years and as such has strict eligibility criteria.
To be eligible for an IVA you must have £6,000 or more of unsecured debt and owe money to two or more creditors. You must also live in England, Wales or Northern Ireland, have a steady income and be able to make a payment of at least £85 per month.
An IVA can help you manage unsecured debts such as credit cards, loans, council tax and utility bill debt, however, if you cannot include debt such as secured debts, child support arrears or student loans.
All of my money will go into the IVA and I won’t be able to save
One of the benefits of an IVA is that it’s based on your affordability. During the application process an experienced debt advisor will go through your income and expenditure to check your affordability. This also paints an accurate picture of your finances and allow you to create a budget that you’ll stick to each month.
However, there’s no denying that life doesn’t always go the way we plan. That’s why it’s important to be able to save small amounts each month to cover unexpected costs.
I can’t have a bank account
You can have a bank account; however, you may need to change provider if you owe a debt to your current bank.
If you owe your current bank money during the arrangement set-up the bank may be able to automatically take money from your account to pay any unpaid debts. This is known as the ‘right to offset’.
That’s why it’s important to switch accounts if your debt is connected to your account.
Changing your bank account is simple and your debt advisor can guide you through the process of finding the best account for your situation.
My employer will find out about the IVA
When you enter an IVA your details are registered on the public insolvency register. However, the only way an employer would find you on this register would be to search your name. As such, if you don’t tell your employer and your employer doesn’t have access to our credit history it’s unlikely they’ll find out.
It’s worth keeping in mind, however, certain industry employment contracts may have a clause about IVAs. If you work in the financial or legal sectors, or in the police, you may be required to inform your employer.
You should check your contract to be sure of your position.
I’ll lose my home
If you’re a homeowner, you won’t be forced to sell if you enter an IVA.
You should be aware that owning your property will be taken into consideration when you apply for an IVA. If necessary, in the final year of your arrangement, you may be required to release equity from your home or re-mortgage. This is to allow you the opportunity to release more funds towards your debt. If you’re unable to do this, your arrangement may be extended for an additional year.
An IVA will stay on my credit file forever
Your credit rating will be affected by an IVA but not forever. Details of the IVA will be held on your credit file for six years from the date the arrangement starts and will be removed from the insolvency register three years after it’s completion.
This may seem like a long time; however, it is more than likely your credit rating has been impacted by debt owed. With that in mind, an IVA can offer a fresh start and the chance to slowly improve your credit score in the future.
If I miss one payment my IVA will fail
It’s understandable that sometimes fortunes change during the course of an IVA so it’s important to have support in place should this happen.
If you are unable to make your IVA payment you should speak to your supervisor as soon as possible. Your agreement can allow you a short payment break in an emergency or your supervisor may be able to amend your monthly payments if the change is small. If you require a longer break or your situation has changed dramatically, your supervisor may need to contact your creditors to agree to the changes.
The most important thing is to always speak to your supervisor if you’re struggling – there’s support available.
As the UK’s largest IVA provider Creditfix is proud to offer confidential and professional advice to those in need. We understand that talking about debt isn’t easy, but our experienced advisors are on hand to offer support to help you find a solution suited to your needs.
Call 0808 253 5687 to speak to an advisor or find more information about the IVA here.