A brief introduction to Individual Voluntary Arrangement (IVA)
An IVA is a formal arrangement between the customer and creditors (which is legally binding) and would be expected to pay all or part of the debts they have. The arrangements are set up professionally by an authorised Insolvency Practitioner like ourselves. They generally last 5 years, in which time the customer will be expected to pay what they can afford outside of agreed ‘reasonable’ living costs and the remaining debt will be legally and formally written off upon completion. 5 years may seem like a lifetime but how quickly has the last 5 years gone?
A debt write off amount of between 25% and 75% is realistic, however, the debt write off amount for each customer differs depending upon their personal financial circumstances and is subject to the approval by their creditors.
Consider an IVA if you are...
- £6,000 or more in debt
- Struggling to keep up with payments
An Individual Voluntary Arrangements (IVA) may hold the key to your debt-free future & could write-off 85% of debts.
Debt Advice Service is here to help so start by using our 30-second online form see if you qualify today.
*Figures based on an example IVA. Alternative solutions may be offered. Lenders are not obliged to accept less than contractual payments. Fees payable if continuing services are provided. Fees & Key information can be found here.
A typical example of an IVA
This example significantly reduced the client total debt by 41% over a fixed term, typically 60 months.
Your monthly repayments would be:
Before an IVA
After on IVA
REDUCED BY 41%
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Is an IVA right for you?
As with any Insolvency process the are advantages and disadvantages. Below are the some of the advantages and disadvantages to be considered when deciding if an IVA is right for you:
- No upfront fees are charged for setting up the IVA.
- If your IVA is approved, creditors who vote against your proposal or who do not vote at all are still bound by it.
- Creditors whose lending is unsecured can’t take any further action against you once the IVA is approved.
- Once the IVA is approved, interest and charges are frozen by law provided you keep up your payments.
- Your insolvency practitioner will help you prepare your proposal, including agreeing the level of your household and personal spending based on guidelines acceptable to creditors.
- You make only a single payment each month. Your insolvency practitioner is responsible for administering and distributing your payments.
- If your circumstances change for the worse, the IP can in certain circumstances authorise a payment break or go back to creditors and ask them to vary the terms of the arrangement.
- You will never be forced to sell your home in an IVA.
- On successful completion of the IVA, the balance of what you owe your unsecured creditors included within the IVA is written off.
As with any insolvency process there are consequences of entering into an IVA, which must be considered. These include:
- During the term of the IVA there are restrictions placed on your expenditure.
- Not all debts can be included in an IVA, for example student loans, child support and maintenance, magistrate court fines and social fund loans are excluded from an IVA, but an allowance can be given to enable you to continue repaying these.
- Creditors may not approve your IVA.
- If you are a homeowner you may be required to release equity in the final year of the IVA through remortgaging. If you are unable to remortgage then your arrangement could be extended for up to 12 months in lieu of the equity available in your property.
- If you become entitled to any windfalls or inheritance over and above £500 during the term of the IVA these funds are to be introduced into the arrangement.
- If you fail to make the payments due under the terms of your IVA, then your arrangement could fail. If your circumstances change, the IP can ask creditors to agree an amended offer, however if creditors refuse to accept amended terms, the IVA may fail. You may then still owe your creditors the amount that you owed at the outset of the IVA.If your IVA fails, the it could lead to you being made bankrupt.IVA’s are recorded on the Insolvency Register, which is a public register. An IVA remains on your credit file for 6 years after it is accepted, and may have a negative effect on your credit score for up to six years after the IVA is accepted.
Individual Voluntary Arrangement (IVA) FAQ
This is a formal arrangement between the customer and creditors (which is legally binding) to pay all or part of the debts they have. The arrangements are set up professionally by an authorised Insolvency Practitioner. They generally last 5 years in which time the customer will be expected to pay everything they can afford outside of agreed ‘reasonable’ living costs.
An IVA involves you paying back part of your debts over a set period of time – this is a legally binding contract.
Bankruptcy is a court order. It ends your liability for debts but can mean that your assets are sold in order to pay the creditors back.
An IVA will take around 3 to 6 weeks to set up depending on how quickly you can gather the supporting information required to present to your creditors.
Just because you might not qualify for an IVA does not mean that you won’t qualify for another scheme. There are other arrangements to pay your debts back and one of our Financial Advisors are happy to help you find the right arrangement suited to you.
No, you can enter into an IVA if you’re unemployed, self-employed, part-time, full time, retired or in receipt of benefits. As long as you have a disposable income above £80 per month after you’ve covered your essential living costs such as household bills, food toiletries car etc
You can enter into an IVA if you’re a homeowner, tenant or living with your family/friends.
No, since an IVA is a legally binding contract, you cannot just change your mind as you have agreed to the terms with your creditors.
Typically, IVA’s last for 5 years. If you’re a homeowner you may be asked to pay the IVA for a further 12 months.
Your payment into the IVA is based on your individual circumstances. One of our Financial Advisors will help you determine an appropriate amount per month based on information you provide about your income and debts.
If you do not keep up your monthly payments, you could be declared bankrupt by the Insolvency Practitioner and your creditors.
Don’t worry if you do not qualify for an IVA, one of our Senior Advisors will be able to determine an alternative solution for you to undertake, based on your individual circumstances.
* To find out more about managing your money and getting alternative free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.
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