Individual Voluntary Arrangement
An Individual Voluntary Arrangement (IVA) is a legally binding arrangement between you and your creditors set up by an Insolvency Practitioner (IP). The agreement is for you to pay less than the total debt over an agreed period of time. After you have made all the payments, the creditors write any remaining debt off.
This option is normally only suitable if you have assets to protect and/or a large amount of debt and can afford minimum monthly payments of approximately £100 per month and/or a lump sum payment.
This option is normally only suitable if you have assets to protect and/or a large amount of debt and can afford monthly payment of approximately £100 per month and/or a lump sum payment.
The IP will draw up a proposal that will set out what you are able to offer and send it to all of your creditors. The creditors then vote on whether they are going to accept the proposal. Creditors holding at least 75% by value of your debt have to vote yes at the meeting for your IVA to be accepted.
You would have to pay the IP a set amount of money each month. They will then take some for their own fees and spread the rest amongst your debts. Most IVAs last for five or six years.
If you have any equity in your home (this means that the house is worth more than the mortgage), you may be asked to apply for secured loans and pay a lump sum. This is called an ‘equity release clause’. If you cannot get a loan, the time you are in the IVA could be extended.
Important points to remember about an IVA:
- You should get free independent advice before selecting an IVA. Companies can sell you IVAs that are more expensive than they need to be.
- You have to be confident that you can stick to the payments for the IVA for the full term. If your income goes up and down, this may not be an option for you. The IVA would fail if you can’t keep to the payments.
- You generally have to be able to pay quite a high amount each month.
- An IVA will appear on your credit reference file for 6 years. This means getting credit will be harder during this time.
- If you have an IVA, your creditors have accepted that you will pay them through the insolvency practitioner. This means that they will stop contacting you.
- If you are a homeowner, the insolvency practitioner could ask you to re-mortgage or try and get a secured loan against your home to pay a lump sum into the IVA.
- You have to pay fees, however you should be able to pay these in monthly instalments.
- Priority and non-priority debts
- Bank accounts and debt
- Drawing up a budget sheet
- Negotiating reduced payments
- Free Debt Management Plans
- Administration Order
- Debt Relief Order
- Individual Voluntary Arrangement
- Will I be 'blacklisted'?
- Write Offs
- What can creditors do if I don't pay?
- Should I tell creditors about my mental health?
- Getting help from a specialist adviser