Individual Voluntary Arrangement (IVA)
1. What is an IVA
An IVA (also known as an Individual Voluntary Arrangement) is a legally binding debt repayment agreement between an individual in debt (debtor) and the people he or she owes money to (creditors). It was introduced by the government as part of the Insolvency Act 1986 as an alternative to bankruptcy
A standard IVA will offer to pay whatever the debtor can afford to contribute each month into a fund, over a three to five year period. The amount that is repaid via an IVA is usually less than the total debt but is accepted as a final settlement by the creditors.
2. How Long Does an IVA Last
An IVA normally lasts for between three to five years, however, it is also possible to complete an IVA in a shorter period, especially if it is possible to provide a lump sum payment.
3. Who Can an IVA Help
Anyone in England, Wales or Northern Ireland with debts over £20,000 and a stable income could benefit from an IVA.
4. How Much Does an IVA Cost
When debtors propose an IVA to their creditors, they offer to repay a percentage of the debt via monthly instalments. The sum suggested is based on what the debtor can afford to pay.
This means that the monthly debt repayments vary on a case-by-case basis. They depend on what assets the debtors have and how much money they have available after their living expenses have been deducted from their monthly income.
However, there does tend to be a minimum amount that creditors will accept as part of the IVA proposal. An IVA is usually rejected if it offers to pay the creditors less than 20-25% of what they were originally owed.
5. What Happens When an IVA Has Been Completed
At the end of the IVA process the supervisor will give you a "Statement of Completion", normally within three months of the final payment. A copy of this will also be sent to the Insolvency Service for their records.
6. What Happens if I Default on My IVA Payments
If you do not adhere to the terms of your IVA by defaulting on your payments then the supervisor of the IVA can commence bankruptcy proceedings against you.
7. What are the Advantages of an IVA Over Bankruptcy
Setting up an IVA does not have any of the same stigmas or disqualifications associated with bankruptcy. Unlike bankruptcy, an IVA is a private agreement with your creditors which means that it does not get publicised (although the law may change in this aspect). There are also no professional disqualifications and you maintain your right to hold public office. However, for some people, bankruptcy may be a better option.
8. Can I Set Up an IVA if a Bankruptcy Order Has Been Made Against Me
If the Bankruptcy hearing has not yet taken place, this is possible. The Insolvency Practitioner may have to issue an Interim Order to halt proceedings while an IVA proposal is put together. If the Bankruptcy Order has already been issued it is still possible to propose an IVA, however it is more difficult to reach an attractive proposal to the creditors as the bankruptcy costs must be taken into account on top of the costs of setting up the IVA.
9. How Do I Set Up an IVA
Once you have decided to apply for an IVA, contact us and we will discuss your IVA proposal.
10. Will I Have to Sell My House if I Set Up an IVA
With an IVA you will not be forced to sell your home. However, you might be asked to release some of the equity in your property to pay your creditors.
11. Will My Creditors Agree to an IVA
In order for your IVA to be accepted, over 75% of your creditors, in value, have to vote in favour of it. In our experience there are certain things that make a creditor more likely to accept an IVA proposal. For instance, you should never propose to repay less than 25% of the total debt.
12. If I Set Up an IVA Will Anyone Interfere With the Running of My Business
As long as you stick to the terms of your IVA, you can carry on running your business under your sole control and without any outside interference.
13. Does an IVA Affect My Credit Rating
Whilst the IVA is in place you are not allowed to take out any further unsecured credit such as credit cards, store cards, personal loans, etc. This is a standard stipulation of an IVA and a note will be put on your credit file alerting potential lenders to the fact that you have entered the agreement. This note will remain on your credit file for a total period of six years (i.e. normally one year longer than the duration of the IVA). While this record is on the credit file many lenders will choose either to lend at a high interest rate or not at all. There are some lenders who specialise in mortgages or secured loans for people with previous credit problems, contact us should you require help in this respect.
It's hard to think straight when you've got a serious debt problem. You're stressed, you can't sleep, people constantly hound you for money and the temptation is to bury your head in the sand. What you need is honest, independent and cost-free advice on the best way of becoming debt-free.
Contact us today for a confidential talk. We'll show you a positive way forward. To speak to an adviser, who will call you to discuss your specific requirements click here to submit your details via our contact form
