IVA

An Individual Voluntary Arrangement (IVA) is a legal process through which you can gain protection from your unsecured creditors by entering into a legally binding repayment agreement with them, which is then supervised by a licensed Insolvency Practitioner (IP).

Example of an Individual Voluntary Arrangement (IVA)

Example of how an Individual Voluntary Arrangement (IVA) can help with your debt problems

Unsecured loan £12,000
Credit card £8,000
Store card £4,000
Total owed £24,000
60 monthly payments £250
Total repayment £15,000
Debt written off 37.5%

IVAs vary and what you can afford towards your debts is the main factor

Is an IVA the right solution for me?

If you have a reasonably high level of unsecured debt, usually over £12,000, with at least three lines of credit from two or more creditors, an IVA could be suitable for you.

What are the fees for this service?

Unlike many other debt management companies, you should not have to pay anything upfront. The IVA proposal will contain details of what is being paid to the Insolvency Practitioner (IP) for acting as nominee and supervisor. All fees are agreed prior to the arrangement and are included in the repayment plan. Once the IVA has commenced, there are no additional costs or fees added to monthly contributions.

Will interest and charges be frozen?

Yes, once an IVA proposal is accepted by your creditors, all interest and charges are frozen.

What debts can be included in an IVA?

Debts that can be included in your IVA are as follows:

  • Personal unsecured loans
  • Pay day loans
  • Credit cards
  • Store cards
  • Charge cards
  • HM Revenue & Customs debts (VAT, PAYE, Self-assessed tax, National Insurance)
  • Catalogues
  • Bank overdrafts
  • Unsecured debts that have a CCJ or Attachment of Earnings in place
  • Personal debts owed to businesses
  • Personal debts owed to family or friends
  • Previous utility (Gas, Water and Electric) suppliers
  • Previous TV/mobile/telephone service providers
  • Debts previously secured against an asset that has since been repossessed

What debts cannot be included in an IVA?

Debts that cannot be included in your IVA are as follows:

  • Mortgages
  • Secured loans
  • Rent and property service charges
  • Current utility (Gas, Water and Electric) debts
  • Current service provider (TV/mobile/telephone) debts
  • Hire purchase (HP) agreements
  • Student loans
  • Benefits overpayments
  • Child maintenance
  • Council tax
  • Court fines

Is my home at risk?

No, unlike Bankruptcy, in an IVA your home is protected. Once your IVA is approved, your Insolvency Practitioner (IP) will register a restriction over the property which is to protect the equity by letting other interested parties know that the property is subject to an IVA.

How long does an IVA last?

An IVA usually lasts for 5 years (60 monthly payments). If you are a home owner and you have equity in your property in the 5th year of your IVA, you may be required to try and release as much as possible for the benefit of your creditors. As an alternative to equity release, for instance, if you cannot get a mortgage, your creditors will normally accept that you will extend the time your IVA lasts for one extra year.

What are the advantages of an IVA?

1. Single Affordable Payment

An IVA allows you to make a single affordable payment, based on your disposable income, to your creditors each month. This payment is paid directly to the Insolvency Practitioner who will share out the money to your creditors on you behalf.

2. Debt Written Off

The IVA lasts for a fixed period of time (normally no more than 60 months). In addition, once the final payment is made, any outstanding debt is legally written off by the Creditors. This means that you know when your debt problems will be resolved once and for all, giving you light at the end of the tunnel.

3. Interest Frozen

Creditors are legally bound to the agreement. They cannot go back on the agreement and demand increased payments. They must also freeze all further interest and charges.

4. Legally Binding Agreement

If you have any debts which are already Count Court Judgements (CCJs) these can be included within an IVA. If you are currently paying an attachment of earnings, this too will be overturned by the IVA. As long as you maintain your IVA payments, then none of the creditors included within your IVA will be able to take any additional legal action against you to try and claim back their debt.

5. Discreet Procedure

An IVA is a discreet procedure and can be used by professionals, forces personnel and the police without damaging career prospects. An IVA is not advertised in the local newspaper or the London Gazette unlike Bankruptcy.

However, it is important to be aware that if you enter into an IVA, your name will be added to the insolvency register which is publically accessible via the internet.

6. Suitable for limited company directors

If you are a director of a limited company, you can use an IVA to resolve your personal debt problem without having to resign your post. This is a significant advantage over bankruptcy where company directors must resign.

Are there any disadvantages to an IVA?

Although the advantages of an IVA are significant, undertaking an IVA is a serious matter. As such, there are some things that you must bear in mind when thinking about an IVA:

1. Credit Rating Effected

The IVA will be recorded on your credit file. This means that you will not be able to take further unsecured borrowing for the period of the IVA. Once the IVA is completed (normally after 5 years), you can borrow again. However, it may take some time for your credit rating to repair.

2. Home Equity Must be Released

If you are a home owner, during the course of the IVA you may have to release available equity from your property to increase the overall settlement offer to your creditors.

3. Name included in Insolvency Register

Whilst your name is not published in the newspaper, it should be pointed out that the IVA will be entered onto the government insolvency register, which is a searchable public database.

4. Failure may result in bankruptcy

If you fail to adhere to the terms of the IVA, bankruptcy proceedings may be taken against you. As such, your home and other assets may be at risk.

How long does an IVA take to set up?

An IVA usually takes about 6-8 weeks to be completely set and accepted by the creditors. Please note that the actual time on setting up an IVA is not fixed. Some IVA are set up quickly because they are simple. A more complex IVA can take longer to set up.

How do I apply for an IVA?

Simply complete the online assessment form on this page.