An individual voluntary arrangement, or IVA, is an agreement between you and your creditors to repay what you owe in a way that is affordable to you.
An IVA can be in the form of a lump sum or several payments spread over a period of several years, or monthly payments spread over 60 months - depending on whether you own a property. IVAs generally last between five to six years.
If you need advice on whether an IVA is the best debt solution for you, please request a callback from our Debt Advisory team.
How would an IVA affect me?
An IVA is a legal agreement between you and your creditors where they must freeze interest and charges and all contact is made through your Insolvency Practitioner. Your creditors are asked to accept the lower payment due to your circumstances, which are reviewed on an annual basis. At the end of the IVA any sum left owing is legally written off. It remains on your credit file during the IVA and for one year after the end of the IVA.
To set up an IVA you will have to speak to an insolvency practitioner (IP). The IP will act as a middleman between you and your creditors, and can help you draw up a repayment proposal based on your individual situation.
Once you and your IP are satisfied with your proposal, your IP will arrange a meeting of your creditors where they will either agree or reject your proposals. Creditors vote for the IVA and if a majority is reached your IVA is approved, the IVA becomes legally binding with all creditors.
The voting rules of an IVA state that providing 75% (in debt value terms) of those creditors that have voted, vote to accept the proposals (with or without modifications) then the IVA is 'accepted' and becomes legally binding on all other parties, whether they voted to accept or not.
An accepted IVA is ‘protected’. This means that your creditors cannot contact you or pursue you for any debt acquired before the IVA was accepted. Even creditors who didn’t agree to your IVA cannot pursue you for outstanding debt.
What are the advantages of an IVA?
- Payments are affordable and spread over a period of around five to six years.
- Payments can be a lump sum or combination of a initial lump sum followed by monthly payments But you can also enter an IVA without a lump sum payment.
- Your chosen Insolvency Practitioner acts as your Trustee and deals with your creditors for you.
- After the IVA becomes protected your creditors cannot pursue you for your debts.
- Once your IVA term is over, your remaining debts will be written off.
What are the disadvantages of an IVA?
- If you are a homeowner you may have to re-mortgage your house.
- If you cannot re-mortgage you will have to make up to 12 extra payments.
- Your IVA will be listed on the Individual Insolvency Register, but will be removed 3 months after the IVA ends.
- Your credit rating will be affected.
- There are setup and handling fees involved in an IVA.
- If you fail to keep up with your payments, your creditors can make you bankrupt.
Who is eligible for an affordable repayment plan?
IVAs can be flexible and are assessed on a case-by-case basis. However, an IVA is likely the right choice for you if:
- You are a UK resident (excluding Scotland),
- You have debts exceeding £10,000,
- You have at least two creditors,
- You have a willing insolvency practitioner to act as a third-party.