What Is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement – or IVA – is a formal repayment plan which allows you to deal with your debts while avoiding bankruptcy.
If you’re struggling with unaffordable debts but have valuable assets you don’t want to lose, an IVA could be the ideal solution for you:
- Protects your assets from seizure
- Stretches out debt repayments over 5-6 years
In this guide, we’ll explain the advantages of an IVA, the way the process works, and how you can qualify.
Contents
What Are the Advantages of an IVA?
Individual Voluntary Arrangements are attractive solutions for people looking to manage their debt without losing their hard-earned belongings.
So, what benefits do they offer?
- You can keep your home
- You can keep your vehicle
- Your debts are frozen
- Writes off some of your debt
- Creditors cannot contact you
- You can continue to act as a company director
As long as you keep with your outlined repayments, you’ll be able to continue life as normal, safe from the legal action of creditors.
What Is the Process of an IVA?
An Individual Voluntary Arrangement works by drawing up a proposal for your creditors. This will outline your monthly contributions and what you intend to repay.
An IVA lasts for 5 years. During this time, you’ll make one monthly repayment, which we’ll divide up between your creditors. At the end of the IVA, any remaining debts can be written off.
You can learn more about the IVA process by exploring the tabs below.
An IVA must be overseen by a licenced insolvency practitioner, like those of our team.
We’ll assess your financial situation, looking at what assets you own, what your income looks like, what debts you owe, and who you owe them to. We can then tell you whether or not an IVA is right for you.
All consultations are free, so get in touch if you need some advice.
If it’s decided an IVA is right for you, we’ll help to draw up your proposal. This outlines what monthly contributions you intend to make.
Each proposal is unique, so it will be tailored to your situation. Our team will ensure your proposal is appealing to creditors and affordable for you.
When the proposal is complete, we’ll send it off to your creditors.
You’ll need the approval of 75% of your creditors – by value – for the procedure to go ahead. If the majority vote is achieved, you’ll officially enter into your IVA.
When your proposal is accepted, all your debts will be frozen immediately, and your creditors won’t be able to contact you or pursue you for payment. If they have any questions, they’ll have to refer to us.
Once you’ve entered into your IVA, you’ll begin making your monthly payments.
You’ll only need to make one singular payment each month. We will divide it up between your creditors for you.
Our fees will be deducted from these contributions, meaning you won’t have to pay anything beyond this agreed-upon monthly payment.
Once you’ve finished making your contributions for the contracted period of time, you’ll be presented with an IVA Completion Certificate, officially recognising that you’ve concluded the agreement.
Any remaining debts are then written off.
If you have some equity in your home, you may be asked to release it. Alternatively, you can continue with your IVA payments for an additional year.
Can I Qualify for an IVA?
You need the backing of 75% of your creditors – by value – to enter into an IVA.
For example, if you owe one creditor 80% of your debt and another 20%, you’d only need the backing of the larger creditor.
Getting the backing of your creditors may seem daunting, but it can be done. Creditors simply need to be convinced that they’d get a better return than they would in bankruptcy. Most lenders are open to the prospect of the IVA, as it demonstrates your intention to repay.
Our team will help you craft a convincing IVA proposal. We’ll ensure that your proposed contributions are reasonable for your budget and that you can keep up with the payments long-term.
Which Debts Can Be Included In an IVA?
Individual Voluntary Arrangements are designed to include all of your debts. As a result, they can include a wide range of different debts:
- Overdrafts
- Credit Card Debt
- Payday Loans
- Personal Loans
- Utility Bill Arrears
- Tax Arrears
- Debt to Family and Friends
Which Debts Cannot Be Included in an IVA?
Although IVAs do cover a broad range of debts, some cannot be included:
- Child Support Arrears
- Student Loan Debt
- TV Licence Arrears
- Magistrates’ Court Arrears
- Magistrates’ Court Fines
Generally speaking, no.
While it is technically possible to include secured debts – such as those against your house or vehicle – the odds of getting a secured creditor to agree to an IVA are very small. They’ll instead look to get a quick return by realising your assets.
If you’re worried your debts can’t be included, get advice from one of our team.
What Are the Alternatives to an IVA?
If you’re worried you won’t be able to qualify for an IVA, there are a few other options to consider.
Remember, you should always consult with an insolvency practitioner before making any hasty decisions – it could save you a lot of money down the line.
Bankruptcy is one of the most common and well-known personal insolvency solutions.
Despite the stigma, it can actually be a great way to get back on track to a debt-free life.
Once you declare yourself bankrupt, your assets are seized and sold to help repay your debts. Then, after 12 months, any remaining debts are written off.
A Debt Relief Order operates in a very similar fashion to bankruptcy.
However, it is specially designed to be used by those with little disposable income who cannot afford to declare themselves bankrupt.
12 months after entering into a Debt Relief Order, your outstanding debts are written off, allowing you to make a fresh start.
A Debt Management Plan is an informal agreement between you and your creditors.
You agree to make certain repayments, and they agree not to take any legal recovery action against you. This is an ideal solution for those with low levels of debt, to whom formal insolvency measures might seem a little drastic.
Be careful though – a DMP is not legally binding, and your creditors can always go back on their word.
Speak to an Expert
If you’re struggling with debt, it’s essential that you contact an insolvency practitioner as soon as possible. Early action keeps your options open, preventing interest rates and charges from spiralling out of control.
Our expert team will assess your situation and let you know which solution is right for you.
Get in touch today to book a free, no-obligation consultation.
FAQs
One of the biggest advantages of an IVA is that you’re allowed to keep your home. However, there are some rules to keep in mind.
If sufficient funds aren’t raised to pay your creditors in full, you might need to release some equity from your home at the end of the IVA. Typically, if there is more than £5,000 worth of equity in your home, you’ll have to pay 85% of it into the IVA.
Alternatively, you can choose to continue your regular IVA payments for another 12 months.
Yes – you’ll be able to keep your vehicle in an IVA.
However, if you own a luxury vehicle, you may be expected to exchange it for a more modest one.
There are no minimum debt requirements to enter into an IVA – you could get an IVA for a debt of £1 or £1,000,000.
However, this doesn’t mean an IVA is always appropriate. Our advisers will let you know whether it’s the right choice for you.
If you miss three payments, you may be served with a breach notice.
A breach notice outlines the terms of your IVA you’ve broken and how you can remedy the situation. If you don’t act, you’ll fail your IVA. When you fail your IVA, you’ll be responsible for paying your debts again. Creditors can pursue you legally and charge back-dated interest on your debts.
Make sure to tell us if you’re struggling to keep up with your IVA payments. Early action can allow room to negotiate payments with creditors and keep you on top of the agreement.
An IVA will remain on your credit score for 6 years. While IVAs don’t have the same stigma as bankruptcy, creditors will view it in the same way, making it very hard to take out loans during this time.
However, this isn’t necessarily a bad thing. Being unable to take out loans can help you to keep on top of your finances and remain debt-free.
Your IVA will be listed on the Individual Insolvency Register and advertised in The Gazette. It will also appear on your credit record.
The general public does not regularly check these records, and they will not appear in online search results.
If you believe that having your information publicly listed on these registers could place you or your family in danger, you can apply to have your address withheld.
If you receive unexpected money—perhaps from a will or a lottery win—it is known as a windfall. If your IVA has a windfall clause, you’ll have to pay the amount into your IVA.
