IVA - Individual Voluntary Arrangement

An Individual Voluntary Arrangement, or IVA, is a legal process that allows you to make a formal proposal to your creditors to clear your unsecured debts without the need to start bankruptcy proceedings. An IVA is a legally binding contract between yourself and the creditor allowing you to become debt free in five years.

An IVA is arranged by a licensed Insolvency Practitioner, and allows you to make a single payment each month to the Insolvency Practitioner, rather than making multiple payments to different creditors. When an IVA is accepted by all parties, the Insolvency Practitioner becomes a superviser to the IVA, ensuring all terms are adhered to. The monthly amount is carefully calculated taking into account all aspects such as assets and liabilites, income and the cost of living.

At the end of the IVA period, the amount you have paid into the IVA is considered to be your full and final settlement. The remainder of the debt is cleared and all creditors involved in the IVA will be considered to have been paid in full. You will then become debt free.

Benefits of an Individual Voluntary Arrangement

Qualifying for an Individual Voluntary Arrangement

An IVA is available any private individual living in England, Wales or Northern Ireland. Although there is no minimum amount you need to know, due to the costs associated your total debt should exceed £15,000 and your disposable income to pay into the IVA each month must be at least £200. To be accepted for an IVA you will also need to be in full or part time employment, over the age of eighteen, and the IVA period must not take you over your retirement age.

How much does an Individual Voluntary Arrangement cost?

The cost of an IVA will vary from case to case and will vary depending on which Insolvency Practitioner you choose. A typical fee can be around £4000 and it is therefore advisable to get more than one quote from different companies to see which suits you best. The fees for the Insolvency Practitioner will be taken from the monthly amount you pay into the IVA, and all parties involved in the IVA will be aware of the amount.

Do the creditors have to agree the IVA?

Once the Insolvency Practitioner has drawn up the IVA, they will send copies to all creditors involved and propose a time and place for a creditors meeting. The Insolvency Practitioner will usually chair the meeting, and providing 75% of the creditors agree to the IVA, it becomes legally binding and all parties involved must adhere to it.

What are the drawbacks with IVAs?

Be aware though as there are some drawbacks with IVAs. Taking out an IVA will severely affect your credit rating and your IVA will be held on the public individual insolvency register. Should your circumstances change and you can no longer afford the monthly payments, your Insolvency Practicioner may stuggle to get creditors to agree to new terms. If this is the case and the IVA fails, you will owe the full amount to the creditors. Additionally, should the IVA extend past the standard 60 month period, most IVAs have a condition built in that your home be revalued and some of the equity used to pay the creditors. Finally, should the IVA fail, you could become bankrupt.