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 have disposable monthly income but are unable to meet the full repayment to your creditors, an IVA can help restructure your debts and potentially repay less than the full amount owed.
- 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 may be able to keep your house and vehicle
- No interest accrues on your debts
- The amount you repay may be less than the amount you owe
- Creditors bound by the arrangement 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 support of the larger creditor.
Our team will review your financial circumstances to help you consider whether an IVA is the best option for you, and your creditors. An IVA should provide your creditors a better outcome than bankruptcy, so it should be acceptable to them. If they have concerns, we will work with them and you to try and find a solution.
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 an IVA is not suitable, or you are not able to afford to make monthly repayments to your creditors, there are alternative options available which our team can advise on.
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
This will be dependent on who you owe money to, and the equity available in your home.
The advantage of an IVA is that you may be able to deal with your house later into the IVA and on terms that you propose to your creditors.
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.
Your IVA proposal will contain details of potential breaches on the IVA, including missed payments. Make sure to tell us if you’re struggling to keep up with your IVA payments to try and find a solution if your circumstances have changed. 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 it will also appear on your credit record.
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.
