IVA: A Guide To Individual Voluntary Agreements

80% of Americans struggle with debt. That includes college graduates, two-parent families, and single adults.

Regardless of demographic factors, an IVA can help you become debt-free.

Living a debt-free life reduces stress, improving your health and quality of life. People who defeat debt overcome anxiety that leads to high blood pressure and heart failure.

Breaking the chains of debt also improves your credit score and increases your buying power. You free up money to save and to invest.

Are you looking for help handling your debt? Get debt help here. Read this guide to understand what an IVA is and how it helps your financial future.

What Is an Individual Voluntary Agreement?

An individual voluntary agreement acts as a promise to pay your creditors. It’s a contract between you and the creditor that details how, when, and how much you agree to pay on the debt you owe.

You can choose to pay weekly, bi-weekly, monthly, or pay in lump sums. Certain factors drive the agreement, such as income and other financial obligations—mortgage payments, utilities, etc.

There’s an incentive.

When you enter this type of agreement with your creditors, they agree to reduce the debt. Some offer an 80%-20% split and some 75%-25%. What this means is when you pay at least 75% of the debt, the creditor wipes out the remaining balance.

The insolvency practitioner calls this process a debt write-off.

What Debts Qualify Under an IVA?

Most common debts qualify for payoff through an individual voluntary agreement. Here are a few basic debts to consider:

  • Personal loans
  • Mail-order debt (shopping catalog debt)
  • Credit cards
  • Department store cards
  • Bank overdraft payments
  • Tax debt
  • Energy debt

There are other debts—some common—that don’t qualify for IVA assistance. They are as follows:

  • Child support
  • Some Court fines
  • Student loans
  • Secured loans
  • Rent payment rears

If you are unsure whether or not a debt fits under IVA, contact your creditor and ask.

How Does an Individual Voluntary Agreement Work?

An IVA takes anywhere from 12 to 60 months to complete. Completion depends on the amount of the debt and how long it takes to pay off. Plus, if you miss a payment, that extends the life of the agreement.

Make sure you adhere to the terms of the IVA agreement. You must keep a job and control your monthly spending. IVA contracts have strict rules about budgeting.

Steer away from trying to borrow money and prepare to have your savings levied. The IVA requires you to use any cash in savings to pay down the debt.

Also, if you receive a cash windfall, expect to apply it towards the debt you owe. This site has more details about that:

Live Debt-Free

Participating in an IVA helps you break free from the chains of debt. Consider the benefits and contact your creditors to see if they participate.

Find out more about how to handle your finances. Take a look at our self-help guides for up-to-date lifestyle advice and tips.

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