Would my lifestyle have to change if I entered into an IVA?

When you are suffering money difficulties and your situation is not good enough to pay off your debts you may look for different relief options available. IVA, Debt Management Plan and Bankruptcy are the three most frequently used debt Relief Programs in the United Kingdom.

No matter what approach you adopt to eliminate your debts, you will have this question in your mind “Would my lifestyle have to change if I entered this Relief Programs?”.

This guide explains the effect of the IVA process on your lifestyle. For a better understanding of the major impacts of an IVA on your way of life, it will be helpful to have a brief overview of the process itself, so you are not aware of what is an IVA read the last section of this article first.

How would my lifestyle change if I entered an IVA?

Surprisingly the answer is No so much, unless you have a very luxurious and excessive lifestyle. Your Creditors will desire to ensure that you have a reasonable standard of living. For your convenience there are guidelines to ensure this, some of which are described in the next section of this guide.

You will have to adjust to a more modest way of living and stick to a budget to stay on top of your debt. However, this does not mean that you should drop your life standard below the line.

Usually, you will have to live without using Credit Cards, Store Cards and Loans in order to get out of debt. This might be troublesome in the beginning but with the passage of time you will get used to it.
In addition to this, when you look at the final result, the cost of living without many luxuries might seem nominal. Following are a some limitations that an IVA will impose on your everyday life:

  • You will not be allowed to obtain any further loans. This includes usage of Credit Cards, Store Cards etc.
  • Paying a monthly installment to the Creditors is your major responsibility.
  • You will have to stick to a strict budget or your IVA may fail.
  • You probably cannot have a fancy Christmas or exotic holidays.

How can I manage my lifestyle during an IVA?

As every individual has a unique financial and social situation, therefore, you should manage your lifestyle on your own merits. However these typical points apply to most of the people trying to manage their finances.

  • Try to cut down all the unnecessary expenses.
  • Figure out a monthly budget and then step down to a weekly budget then work out how much you can afford to spend on basic necessities of life i.e. food, clothes, utility bills etc. If you stick to your budget your lifestyle will not suffer until you face an emergency.
  • Maintain a list of standing orders or direct debits that you have set up earlier. Your bank will give you a printout on your demand.

What if I still have difficulties in adopting a new lifestyle?

This happens when you are unable to formulate a budget and manage your expenses. If this happens to you, you should seek advice form your Insolvency Practitioner.

Will I be completely debt free once I complete the IVA term?

When you face so many hardships and live hand to mouth, you really want a result in the end. Luckily, the answer to above question is yes. Once you pay the final installment, all of your outstanding debts in the IVA are written off.

What is an IVA?

Individual Voluntary Arrangement (IVA) is an approach to settle unsecured debts introduced for the people willing to avoid Bankruptcy.

IVA was originally introduced in part VIII of Insolvency Act 1986. Because of its softer nature than Bankruptcy, it has become one of the most commonly used debt consolidation methods in the United Kingdom. In IVA the debtor and the Creditors agree on a repayment plan with the help of an Insolvency Practitioner.

The Insolvency Practitioner is a legal expert who mediates between the Debtor and the Creditors and supervises the whole process. In an IVA you have to pay as much as you can after spending your income on basic necessities of life. IVA usually lasts up to five years and at the end of this term all of your debts are cleared by the Creditors.

IVA is accepted via voting process and you need a minimum of 75% votes in your favor. Debtors, usually, will only agree to IVA if they can recover at least 25% of their total outstanding amount.

A deeper understanding of your financial circumstances and assets are necessary before evaluating an IVA. We suggest you to seek professional advice and get more information on Pro and Cons of this debt solution. If you need more infos on how an IVA works and its process, visit our guides selecting the appropriate menu present in this page.
In our site you will find also a useful list of certificated IVA firms and respectable charities.

Highlights:

Your lifestyle will not change dramatically when you enter an IVA. It is important to remember that you won't be able to use Store Cards and Credit Cards. You will have to comply with a monthly budget to stay In Control of your money.

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