Individual Voluntary Arrangement - IVA
Discover how an IVA could write off unafforable debts
What is an IVA?
An Individual Voluntary Arrangement (IVA) could be a way to avoid bankruptcy, keep your home and become debt free – usually after five years.
It is a formal contract drawn up between those with unaffordable unsecured debts and their creditors. You agree to repay as much as you can afford, usually over five years, after which any remaining debt is written off.
An IVA is intended to be an alternative process to bankruptcy and is not a legal loophole allowing anyone to avoid repaying their debts.
Creditors will only accept the proposal if they believe it to be in their best interests and certain conditions are met.
IVA qualifying criteria
- You must be insolvent, which means you can’t repay your debts as they fall due, or that your debts are more than your other assets
- You must be able to demonstrate proof of your circumstances
- You can only obtain an IVA by using the services of a licensed Insolvency Practitioner, who acts initially as a “Nominee” to assist you to prepare all the necessary documents (once your IVA is approved a “Supervisor” will be appointed for the duration of your IVA)
- For an IVA to be accepted, 75% of the voting creditors by debt value must approve e.g. any single creditor with 25% or more of the overall debt level must not reject
Advantages of an IVA
- A way to avoid bankruptcy
- Make one affordable manageable monthly contribution
- You only repay what you can afford after taking into account your personal circumstances
- Legal action by your creditors is stopped, as long as you make your IVA monthly contributions
- The interest on your debts is frozen
- Any debt included in your IVA, that you have not repaid at the end of your IVA, is written off
- You could become debt free in five years as once you’ve made your final contribution, any remaining debts within the IVA are written off
- No upfront fees are charged – the Nominee and Supervisor fees are deducted from your agreed monthly contribution
- You will stop paying interest on your debts from the day your IVA proposal is approved and for the duration of the IVA, as long as you continue to make your agreed contributions
- An IVA stops unsecured creditors harassing you
- Creditors and debt collectors can’t legally pursue debt repayment once an IVA is in place, whether they agree to the IVA or not
- An IVA means you reach an agreement with your creditors whereby they cannot bankrupt you if you maintain the agreed IVA contributions
Disadvantages of an IVA
- A fee is charged by both the Nominee and the Supervisor in respect of these services, both of which are included within your contribution and the time frame
- Your credit file will be affected and the footprints of an IVA will remain on your credit file for six years
- If you go against the terms of the IVA then you could face bankruptcy proceedings
- It is the decision of your creditors whether or not an IVA proposal is approved
- IVAs typically include a “windfall” clause, which means if you come into some money (e.g. an inheritance) this is taken into account and you could be required to make increased payments or contribute all of any windfall
- If your income increases (salary, bonus or overtime) throughout the lifetime of the IVA your monthly contribution may increase
- Any debts that can’t be included in your IVA will be your responsibility to pay, for example court fines, student loans or money owed under family court proceedings (these debts will be considered when calculating your expenditure to ensure that payments to these debts can be maintained throughout the duration of your IVA)
IVA help and advice
If you’re considering an IVA as a solution to your debts, call us today and speak to an expert advisor. They will discuss your situation and all available debt solutions. You can also download and read Is a Voluntary Arrangement right for me? which is available here.
Call now for free on 0800 047 8680.