Debt Solutions

Individual Voluntary Arrangements (IVA)

Debt Solutions

What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement is a debt solution that allows you to “freeze”” your debt and agree to pay them back over a specified period, usually 5-6 years. Any money you owe thereafter is written off.

An IVA is a legally binding agreement between you and your unsecured creditors, arranged and supervised by a licensed Insolvency Practitioner (IP). In short, you agree to pay back the maximum you can afford over a specified period of time, at the end of which period your creditors agree to write off any remaining balances.

We will work with you to calculate what you can comfortably afford to pay each month and also assess whether you have anything else you are able to offer to your creditors to enhance the agreement e.g. from the sale of an asset, remortgage, or savings.

We do not charge you for advice about an IVA or for help with the preparation of the documents. If you are in a debt management plan already it will continue as normal until your IVA has been approved.

The fees for an IVA are agreed with your creditors and are taken out of the money paid into the arrangement by you once the arrangement has been approved, so you do not pay anything extra to cover the fees.

Is an IVA the right solution for you?

An IVA is a form of insolvency and is a legally binding agreement therefore it is important that you consider whether:

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You feel able to commit to a regular payment for the next 5 years
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You may be able to resolve your financial problems without the need for a formal arrangement e.g. if you are expecting a pay rise or could sell an asset to pay your debts
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You are willing to be open and honest with your creditors about everything that you owe and all of your assets
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You are willing to provide the Insolvency Practitioner with proof of your income and bank statements each year. A review of income and expenditure is usually a required term of the agreement
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You are in financial difficulty and cannot make the required payments to your creditors

Advantages of an IVA:

You will pay an amount that you can afford over a limited period, usually 5 years

The remainder of your debts will be written off at the end of the term

Your creditors can’t pursue you for the debts once the IVA is agreed, and they can’t apply interest and charges

If you are a homeowner you will be able to stay in your home but you may have to make additional payments to the arrangement

Disadvantages of an IVA:

If you fail to keep to your side of the agreement, it could fail and you may owe as much as you did at the start

The IVA will show on the Insolvency Register

If your IVA fails, your creditors or your IP could apply to make you bankrupt

There will be restrictions on your spending whilst you are in an IVA

If you have a property with equity, you will need to try and re-mortgage towards the end of the agreement. If you are unable to do so the IVA may be extended by 12 months

Some debts such as mortgages, secured loans, taxes and fines can’t be included in an IVA so you will need to keep paying these

You can’t borrow more money during the course of the arrangement

If your situation changes for the better you will be expected to pay more to your creditors

The IVA will show on your credit file for 6 years and will affect your ability to obtain credit

If your circumstances worsen and you can’t maintain the payments, your arrangement could fail

If you receive a lump sum e.g. an inheritance or settlement, during the period of your arrangement you will be required to pay the full amount into your IVA. A balance will only be repaid to you if all debts plus the fees and costs of the IVA have been repaid

IVA Frequently Asked Questions

You prepare a proposal to your creditors. An Insolvency Practitioner considers the proposal and, if he/she considers it appropriate, calls a meeting of creditors to consider it. If 75% of your creditors agree to the proposal it will be accepted. They may suggest changes to the proposal which would be discussed with you. When the terms of the arrangement are agreed by you and your creditors the arrangement is approved.

An IVA is a formal, legal agreement between you and your creditors.

The Protocol is an agreement which provides a structure, approved by the major banks and credit organisations, for dealing with consumer IVAs. If Insolvency Practitioners follow the requirements of the protocol in preparing the proposal, creditors who have accepted the content of the protocol are expected to adhere to the terms.

It is the formal document which forms the basis of your agreement with creditors.

The terms of the proposal will be specific to your circumstances but your creditors will expect you to pay the maximum you can afford on a monthly basis, for the duration of the IVA. For example, if your income increases by more than 10% they will expect you to increase your payments and if you receive a lump sum you should pay that into the arrangement too. If you have other assets they may have to be used for the arrangement as well; we will discuss with you how your assets can be included or excluded from the arrangement depending on your circumstances.

During the IVA the creditors are required to agree to freeze all interest and charges on your debts. If you keep up your side of the agreement, whatever is left owing at the end of the IVA will be written off by your creditors. This means that you only pay back what you can afford during the term of the arrangement.

If you do not have enough income to make monthly payments, you can still do an IVA providing you can make a one-off lump sum payment. There are a number of ways this money can be raised. For example, a friend, relative or third party may give you a gift in order to clear your debts, you could release the equity in your property or surrender a life policy. The creditors are likely to accept writing off the majority of your debt if it is clear to them this is the only solution.

In a lump sum IVA the whole process can take as little as 3 months compared with 5 years in a monthly payment IVA.

An IVA can be agreed and in place in less than 6 weeks. For you this will mean a suspension of all legal action, no further worrying phone calls or being chased by debt collection agencies.

Once you have received debt advice and decided an IVA is the right debt solution for you, we will need you to provide evidence of each of your debts, monthly income and expenditure, details of any assets etc. We require a clear summary of your financial situation for your creditors. Once we have assessed this information, we will confirm whether an IVA is the right option for you.

If you have equity in your property you may have to re-mortgage to release equity which will be paid into the IVA. You won’t have to re-mortgage if it will make the payments unaffordable or if it will take your mortgage above 85% of the value of your property, but in these cases you may need to pay into your IVA for an extra year instead.

The fees for an IVA are agreed by your creditors and are taken out of the money paid into the arrangement once the IVA has been approved. You do not pay anything extra to cover the fees.

IVA companies may charge different fees, it is important you understand the fees before you go ahead with an IVA.