Individual Voluntary Arrangement

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Individual Voluntary Arrangement

An Individual Voluntary Arrangement, or an IVA for short, is a legal procedure to deal with your unmanageable debts.

An IVA is effectively an agreement you make with your creditors to pay them an affordable amount over a set period of time (usually 5 or 6 years) at the end of which, any remaining debt is written off.

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An IVA will provide you with legal protection from your creditors demanding money from you. The IVA legally prevents your creditors from taking any action against you to recover their debt. This means that your creditors cannot:

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  • Call or write to you asking you to pay them,

  • Send the bailiffs to your home,
  • Take you to court. They cannot apply for a County Court Judgment (CCJ) against you,

  • Apply for you to be made bankrupt.

If you enter into an IVA, you will make a single monthly payment to a licensed insolvency practitioner (IP) who will manage your IVA. The IP will then be legally responsible to divide this money between your creditors, as agreed, after deducting IP fees and costs.

Debt Solution Example

The following is a real life example of a completed IVA

Monthly Repayments

Total Owed £33,809 | Paid Back £7,227 | Written Off £26,582

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Advantages of an IVA

  • You only make one payment for all your debts for a set period of time.
    All your unsecured debts will be dealt with in an IVA and you will only make 1 payment a month for all the debts.

  • All interest and further charges on your debts will be frozen.
    Once the IVA is approved, no further interest or charges can be applied to your debt.

  • Helps you to deal with your debts and relieves creditor pressure.
    An IVA is a legal procedure designed to deal with unmanageable debts.

  • Enables you to repay your debts at an affordable level and within a formal structure.
    Your IVA payments are based on your affordability and for a set period of time.

  • Provides you with legal protection from creditor action.
    Once your IVA is approved, your creditors cannot take any further legal action against you to recover the debt.

  • You will not lose your home (as long as you maintain your mortgage and secured loan repayments).
    An IVA will help protect your home and you will not be forced to sell it. You may however, be expected to remortgage your property for the benefit of your creditors.

  • You will not lose your job.
    Certain professionals can lose their job in bankruptcy. This is not the case in an IVA. However, you would need to check your contract of employment to ensure that there are no restrictions for you to enter into an IVA.

Disadvantages of an IVA

  • Will affect your credit rating.
    Details of the IVA will be recorded on your credit file for 6 years.

  • You will be restricted from taking further credit.
    In most cases you will be allowed to take further credit of around £500. Any credit above this amount would need to be approved by the insolvency practitioner managing your IVA.

  • You will be expected to remortgage your property.
    If you own a property, you would be expected to remortgage it towards the end of an IVA if you can.

  • You may be made bankrupt if the IVA fails.
    When your IVA is approved, your creditors may put a condition that if the IVA were to fail, the insolvency practitioner will be forced to petition for your bankruptcy. This is not always the case though.

  • Details of the IVA will be recorded on the Insolvency Register.
    Details of your IVA will be recorded on the insolvency register which is a public register and can be found on the internet.

  • In most cases, an IVA will last longer than bankruptcy.
    Generally, monthly payments in bankruptcy last for 3 years and 5 years in an IVA.

  • If your circumstances change, then your payment amount could change or the IVA could potentially fail.

Whether an IVA is the best solution for you would depend on your circumstances and will require specialist debt advice. Speak to one of our debt counsellors by clicking on the link below.

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