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Do all my creditors have to approve my IVA?
By Nick Boyle of Think Money
An IVA (Individual Voluntary Arrangement) could really help if you have unsecured debts that you just can't afford to repay. It works by reducing your monthly unsecured debt repayments to an affordable level and enabling you to pay off a portion of your unsecured debts - before the rest is written off (assuming you uphold your side of the agreement all the way through). But before you can enter into an IVA, you'll have to get the approval of most of your lenders. IVA: how it works An IVA can't start unless you have approval from 75% of your unsecured lenders (by debt value). If this happens, all of your unsecured lenders will be bound by the terms, even if they didn't vote in favour. To get this approval, you'll work with an Insolvency Practitioner (IP) to draw up an IVA proposal. This proposal sets out your case for an IVA, and includes details of your financial background, as well as the proposed terms of the IVA. This will then be sent to your lenders. If it's approved by enough of them, your IVA will begin. A typical IVA involves making monthly payments for five years, although this can vary depending on what's agreed. You'll pay as much as you can every month into your IVA (taking into account what you need for essential expenses such as rent/mortgage, utility bills and food), and if your disposable income changes your payments may change accordingly. On successful completion of the terms, your IVA will come to an end - any unsecured debt you still owe will be written off. Is an IVA the right option for me? This depends on your circumstances. An IVA will only be an option if you need it - you must be able to demonstrate that you can't afford to pay back everything you owe, and that you can (in most cases) afford to commit to monthly payments. But even if you do qualify, it may not be the ideal solution for you. For example, some people may be better off with bankruptcy. Bankruptcy may force the sale of your home (if you're a homeowner), but it's usually over more quickly than an IVA, and doesn't require monthly payments if you can't afford them. If you're a homeowner, an IVA may require you to release equity, but it's very unlikely to result in the sale of your home. It will, however, affect your credit rating - as will bankruptcy. You'll need to speak with a debt adviser before you can decide which approach is right for you. But if you want to write off the debt you can't afford without putting your home at risk, then an IVA could well be your best option.
Nick Boyle is a financial expert at Think Money .
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