If you’re thinking about managing your debt through an IVA, here’s why January could be the perfect time to get started.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a structured debt management plan. With the guidance of an Insolvency Practitioner, you’ll reach an agreement with your creditors, which typically lasts five or six years.
Throughout the IVA, you’ll commit to paying a set amount towards your debts each month, calculated based on what you can afford. Any interest or additional charges on your debts will be frozen, and once the IVA concludes, any remaining debt will be written off.
If you’re struggling to meet your debt repayments but can contribute some disposable income, an IVA might be an effective solution to regain financial control.
While you can start an IVA at any time, beginning the process in January comes with distinct advantages:
Start the Year with a Fresh Financial Perspective
The new year often symbolises a fresh start, making it an ideal time to reassess your financial situation and set goals for the future. If you’ve found it challenging to keep up with repayments recently, particularly with interest and penalty charges adding up, January could be the perfect time to take action. For many, tackling debt may even be a new year’s resolution.
Starting an IVA in January means capitalising on this motivation. By reaching out to a debt expert now, you can use this momentum to begin the journey to financial stability.
Stop Interest and Charges from Accumulating
December is typically one of the most expensive months of the year. From rising winter energy bills to festive spending, the financial pressure can quickly mount. Once the holidays are over and routine returns, you may find yourself confronted with new debt that risks putting you in further financial hardship.
By entering an IVA in January, you’ll benefit from having your debts frozen, meaning you won’t have to worry about further interest or charges adding to your balance. Additionally, creditors won’t be able to pursue legal action against you while the IVA is active. This can provide much-needed breathing space to focus on paying off your existing balances.
Account for Updated Expenses
January often comes with rising costs, as businesses adjust their prices in line with inflation. This means your household bills and other essential expenses are likely to increase, even if your income doesn’t.
Starting an IVA in January enables you to factor in these updated costs when calculating what you can realistically afford to pay. If you were to enter an IVA in November or December, your estimated disposable income might not reflect these higher costs, leaving you with less flexibility in the new year.
Annual Reviews at the Right Time
Your IVA will be reviewed annually, allowing your Insolvency Practitioner to evaluate your circumstances and decide whether your monthly payment remains fair. They’ll assess factors such as rising expenses – often seen in January – or any increases in income, such as a pay rise or promotion.
By starting your IVA in January, your annual review will naturally align with the start of the year, offering you an opportunity to revisit your budget and make adjustments. It’s also a great time to reflect on the previous year’s spending and identify potential savings for the year ahead.
Easier to Track Your Timeline
Committing to an IVA is a long-term decision. Whether it spans five or six years, it will affect your credit score, borrowing capacity, and spending habits during its term.
Starting your IVA in January can make it easier to track its duration and milestones. With the agreement beginning at the start of the calendar year, you’ll have a clear timeline, helping you plan ahead for life after the IVA.
Interested in learning more about IVAs? Our team at My Debt Plan is here to assist. Contact us on 0161 8260 585 or visit our website today.