What Are The Impacts of Personal Insolvency?

Across the UK, more and more of us are facing financial difficulties as a result of the ever-rising cost of living crisis and this can lead to acquiring a multitude of debts that we can no longer pay off. The option left to many is an Individual Voluntary Arrangement, or IVA. This is a formal and legally binding agreement between yourself and your creditors to pay off your debts over a period of time. This is agreed by the court and means that your creditors have to stick to it, by ceasing to charge you interest.

This can be an attractive solution to many if your debts are over £10,000, as it stops your debts growing with interest and can make them seem more manageable. If you do decide to get an IVA, you will be required to establish a repayment plan with your insolvency practitioner. At Exodus Insolvency, our team of dedicated insolvency practitioners are on hand to support you through this process and can help to work out a realistic monthly payment plan that works for both you and your creditors. Your payment plan will usually last for 5-6 years but this will take care of your debts without allowing them to escalate with mounting interest rates. We will review your situation each year. Your payments may alter if you have a change in your income – for example, if you receive a pay rise, you may be expected to pay more into your IVA each month. If your payments aren’t enough to pay off your debts in full by the end of your agreement period, you won’t be required to pay off the rest, which can make this arrangement even more enticing.

When you get an IVA, you can include the following debts:

• Energy bill arrears
• Council tax arrears
• Payday loans
• Store cards
• Catalogues
• Personal loans
• Overdrafts
• Credit cards
• Tax or benefits arrears
• Outstanding invoices
• Debts to family and friends

Any number of debts can be combined into one IVA, but an arrangement like this will usually be most suitable if you have more than one creditor. An IVA allows you breathing space to deal with your arrears without companies hounding you.

However, an IVA will have detrimental effects on your credit rating and related affordability checks. An IVA will remain on your credit report for 6 years, which will impact your ability to obtain further credit. Your credit score will go down as a result, and this means that you will likely struggle to borrow money in the future. Many estate agencies and referencing companies for lettings will not be able to approve you for a rental property unless you are able to pay for the full tenancy upfront. That being said, any windfalls such as a bonus or inheritance will be liable to be paid into the IVA to offset your debts, rather than being yours to freely spend.

At Exodus Insolvency, we can sit down with you and discuss your individual case and circumstances before you choose to proceed with an IVA. If you are facing financial difficulties, we strongly recommend that you speak with a member of our team, who will be able to offer balanced advice and help you to find the best course of action. Call us today at 028 9344 0096, or leave us a message to request a callback. We look forward to hearing from you soon.