An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your debtors, stating that you will pay back your debts over a certain period of time. IVAs are usually set up by insolvency practitioners, but to get a general idea of how much you will need to pay back, you can use an online IVA calculator.
While the most obvious impact any type of debt agreement might have is on your credit score, there are various other areas to consider. Before you enter into any binding agreement with your debtors, it’s always best to seek the advice of an insolvency practitioner who can explain the best course of action.
Below are some ways an IVA can affect you from your job to future income.
Jobs
While an IVA won’t affect most careers, if you are a solicitor or an accountant, then you may be unable to practise your profession. In these cases, if you are allowed to continue your practice, then you will probably be subject to certain terms and conditions.
The best way to find out if you can continue with your current job before entering into a debt agreement is to consult the clauses in your contract and ensure that an IVA won’t result in termination or a forced career change.
Possessions
IVAs generally protect everyday items in your possession. However, it’s not advisable to hold on to valuable items such as expensive jewellery and antiques. If your debtors find out you have these in your possession, this might impact the initial agreement. It’s advisable to sell these before you enter into an IVA as you may find they help substantially towards paying off your debts.
Assets
Assets include things such as land, cars and even your home. These are usually of significant value and are often used as collateral in some financial agreements. Assets may also be included in your IVA, meaning you may have to sell them to raise funds to pay back your debtors. When writing a proposal with your insolvency practitioner, ensure you mention the assets you need to keep. For example, if you travel long distances to work, then you will need your car to maintain your steady income.
Future income and assets
The majority of IVAs have a windfall clause. A windfall refers to money you obtain unexpectedly, such as inheriting a house or winning the lottery. In such cases, the money you earn from these events needs to be paid to your debtors.
In addition, if you sell your house and move to another property, the money made from the sale may be paid towards your IVA. If your income also rises during the term of your IVA, you must also declare this with the insolvency practitioner. Failure to do so can result in debtors taking legal action against you.