Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement (IVA) is a legally binding agreement made between you and your creditors to pay back an affordable portion of your debt over a set period.
How much debt do you have?
How it works
An IVA allows you to pay one affordable monthly payment over a set period of time (usually five years). Your Insolvency Practitioner will make payments to your creditors on your behalf out of the money that you pay in.
IVAs are put forward and overseen by a licensed professional known as an Insolvency Practitioner or 'IP'. After a detailed discussion with you to understand your financial situation, an IP will aid you in preparing a formal document called a 'Proposal' which is provided to your creditors. The proposal summarises your financial position, and outlines the fair offer of repayment that you want your creditors to consider.
Your creditors are then able to vote as to whether they wish to accept your proposal. In order for the IVA to be approved, 75% (by value) of voting creditors must be in favour of your offer.
From the money you pay, fees will be taken to cover the cost of administering your IVA. These fees are detailed in your IVA proposal and will be agreed by your creditors. Fees are not charged on top of your monthly repayment, but are included in your affordable monthly repayment.
Upon successful completion of your IVA, any remaining unpaid, unsecured debts will be written off.
An IVA is only available in England, Wales and Northern Ireland.
Advantages
One affordable monthly payment
All of your necessary living costs will be taken into account before an IVA payment plan is agreed.
Stop interest and charges
Whilst subject to an approved IVA, any interest and/or charges are frozen. These can't and won't be added to your debts by your creditors, preventing the debt amount from increasing.
Write off a significant portion of your debt
Typically an IVA lasts for five years. Provided your agreement is adhered to, your remaining unsecured debt will be written off.
Protect your home and vehicle
Essential assets such as your home or vehicle are usually protected during an IVA. You may retain these, provided they are of a reasonable value.
Stop worrying calls and letters
Once your IVA has been accepted by creditors, they are bound, by law, to no longer contact you requesting payment directly. The IVA provider will deal with creditors on your behalf.
Stop court and bailiff action
Provided you are sticking to your IVA terms, creditors are not entitled to take any legal action against you, including sending bailiffs to visit you.
Disadvantages
Requires creditor agreement
A high proportion of IVAs proposed are accepted however your creditors don't have to agree to an IVA, and therefore we can't guarantee it. An Insolvency Practitioner will only propose an IVA on your behalf if they believe there is a good chance of it being approved.
Keeping to a budget
The regular monthly repayment that an IVA requires you to commit to will mean that you need to manage finances within a budget. If you're not used to doing this, you might find this difficult.
It will affect your credit score
An IVA will remain on your credit file for 6 years from the date it is approved, or until your IVA is finished. If your IVA runs for 5 years, it will remain visible for a further 12 months from the date of completion.
Added to the Individual Insolvency Register
Your IVA will be added to the Individual Insolvency Register. This will be removed 3 months after the IVA completes.
You pay fees to your IVA company
The fees that are paid in an IVA are typically built into your affordable monthly repayment.
Approval required for further credit
You are unable to take any credit of £500 or over without gaining the explicit consent of your IVA Supervisor.