If you’re considering entering an IVA to manage your debt, here’s why January might be the ideal month to begin your journey to financial stability.
Understanding IVAs
An Individual Voluntary Arrangement (IVA) is a formal agreement designed to help you manage your debts. Facilitated by an Insolvency Practitioner, an IVA usually lasts five or six years and requires you to make monthly payments based on what you can afford.
While the arrangement is active, interest and charges on your debts are frozen, and at the end of the IVA, any remaining unpaid debt is written off.
For those struggling to keep up with repayments but able to contribute some disposable income, an IVA can be a powerful way to regain control over their finances.
Although you can start an IVA at any time of the year, January offers some unique benefits:
Make a Fresh Start with Your Finances
The beginning of a new year often feels like a fresh start. It’s a chance to evaluate your current financial situation and set clear goals for the months ahead. If debt has become increasingly unmanageable, with interest and penalties mounting, January might be the perfect time to take action.
For many people, tackling debt is a top priority for the new year. By starting an IVA now, you can use this renewed determination to contact a professional and take the first steps towards achieving financial stability.
Avoid Additional Charges and Interest
The festive season often brings higher expenses. From rising heating costs in winter to Christmas shopping, December can leave you with a larger-than-expected financial burden. Once the festivities are over, you might find yourself struggling to keep up with repayments, especially if interest or penalty charges are applied.
Choosing to start an IVA in January ensures that your debts will be frozen. This prevents additional interest from accruing and stops creditors from taking legal action, allowing you to focus on reducing the balances you already owe.
Incorporate Updated Budgeting
As the new year begins, many companies introduce price increases, particularly on household essentials. Inflation can drive up the cost of living, while your income may not always rise to match.
By entering an IVA in January, you can base your agreement on your actual income and expenses for the year ahead. If you start the process earlier, in November or December, your disposable income calculation might not account for these increased costs, leaving you with a less realistic budget.
Timely Annual Reviews
Your IVA includes an annual review, during which your Insolvency Practitioner will assess whether your monthly payments remain appropriate. They’ll consider any changes in your financial situation, such as rising expenses or an increase in income due to a promotion or pay rise.
Starting an IVA in January aligns your review with the start of the year, providing a convenient opportunity to reassess your budget. You can reflect on the previous year’s spending, identify ways to save, and plan for the year ahead.
Simplify the Timeline of Your IVA
An IVA is a significant commitment, lasting five or six years. During this time, it will affect your credit rating, borrowing capacity, and spending habits.
Beginning your IVA in January can make it easier to track its progress and milestones. With a clear timeline starting at the beginning of the calendar year, you’ll be better equipped to plan for life beyond the IVA.
Would you like to explore your IVA options further? Speak to our friendly team at My Debt Plan by calling 0161 8260 585 or visit our website for more information.
