Individual Voluntary Arrangements

What is an IVA?
An IVA is a formal agreement that helps a person with large unsecured debts, who is unable to afford their contracted monthly repayments, reach a new agreement with their creditors. An IVA normally consist of 60 monthly repayments, calculated by establishing what the debtor can actually afford to repay, once all the debtor’s essential living costs have been taken into account, and will replace the original agreed monthly payments for the original debts. Once the IVA has been successfully completed the debtor will be debt free even though they may not have repaid all their original debts, with the creditors being legally obliged to write-off any outstanding unpaid debt.
Who can qualify for an IVA?
Anyone who lives in England, Wales or Northern Ireland, who has total debts of more than £15,000, owed to more than 3 creditors, who is struggling to afford their monthly debt repayments, could qualify for an IVA. They should also be employed, or self employed, or at least not have an income solely dependent on benefits.
How much will my IVA repayments be?
The IVA repayments are calculated by assessing what is affordable to the debtor, rather than what had been previously agreed. Therefore each IVA will have its own specific repayment, taking into account the personal circumstances of the individual concerned. However, there is a minimum repayment level, below which creditors will reject the proposed IVA.
Who pays for the IVA?
An IVA’s administration costs form part of the IVA arrangement, with creditors having control over the level of fees being charged by the Insolvency Practitioner for doing the work on the IVA case. The debtor pays money into his IVA fund each month for the benefit of his creditors and the IVA fees are deducted from this IVA fund. Therefore, the IVAs costs are paid for by the creditors.
How long does it take to set up an IVA?
Under normal circumstances an IVA will take 6-8 weeks to prepare, and once prepared a further 2 weeks notice needs to be given to the creditors, to allow them time to consider the IVA being proposed, and assess whether they will accept or reject the IVA.
Can I do an IVA if I am self employed?
Yes, it is possible to enter into an IVA if you are self-employed. All the normal IVA’s qualifying requirements are still needed, but in the case of self-employed applicants there needs to be proof of income available. This would normally be in the guise of 6 months trading accounts.
Will I need to set up a new IVA bank account?
Not necessarily. If your bank account is without any credit facilities, and you have no other debt with your bank, such as a loan or a credit card, then you will be able to keep your bank account active. If you have an overdraft, loan or creditcard with your bank, then you will need to open a fresh account.
How will your creditors react to an IVA?
Nowadays, creditors are becoming very familiar with IVAs, and normally they have a well documented company policy which outlines their stance on IVA proposals. Whilst the IVA is in the process of being drafted, you will be instructed in the correct protocols to follow, so as to give your IVA the best chance of success.
What happens if I have IVA payment problems?
In the event you experience difficulties in maintaining your IVA repayments, you should contact your Insolvency Practitioner, because missing IVA payments can lead to a breach of your IVA. If you do breach your IVA agreement there is a real possibility of your IVA being failed, which in turn could lead to you being made bankrupt.
What is the legal position of an IVA?
An IVA forms part of the 1986 Insolvency Act, and is designed to offer itself as an alternative to bankruptcy for people who are insolvent. Qualified professionals, Armed Service Personnel, serving Prison Officers and Police Officers, who otherwise may damage their career prospects by declaring themselves bankrupt, can apply for an IVA to deal with a serious debt problem. Once accepted, the IVA legally binds all parties to the terms offered in the IVA proposal, even those creditors which rejected the IVA proposal.
Will an IVA affect my credit rating?
Yes, an IVA will damage your credit rating. The IVA will be noted on your credit file, and that note will stay there for 6 years. The IVA would normally be a 5 year agreement, and during the IVA it is agreed that you will no apply for further credit. Once the IVA has been completed successfully, you will be able to apply for credit, though it may be difficult to obtain for the final year the IVA is noted on your file. After the IVA has been removed, you can start to rebuild your credit profile.
If I enter an IVA will I be made to sell my house?
No, unlike bankruptcy, an IVA protects the equity in your house, and you will not be required to sell it. There will be an assessment made on value of your equity, and your creditors will want the assurance from you that you will release any equity that may be available at a pre-arranged time during the IVA. However, your creditors will have restrictions placed on their expectations, and as much as 25% of the equity in your home can be protected from being passed over to creditors.
IVA or bankruptcy?
This decision will be based on personal circumstances, and depending on what assets you have, whether or not you have a career you are trying to protect, and your future earning potential, assessing this decision can be very difficult and complex. We can offer you guidance, but ultimately, it will be your decision.
IVA or Debt Management Programme (DMP)?
This decision will be based on personal circumstances, and depending on what assets you have, whether or not you have a career you are trying to protect, and your future earning potential, assessing this decision can be very difficult and complex. We can offer you guidance, but ultimately, it will be your decision.
What happens after my IVA finishes?
Once you have successfully completed your IVA your will be debt free. You will receive a certificate of completion from your Insolvency Practitioner, and your credit file will be show your IVA as successfully completed. You will be able to move forward with you life without the weight of your debt. You will have a substantial increase in your disposable income, and you will have the comfort of knowing you are living within your means.