Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangements (IVAs) are formal, legally enforceable agreements between you and your creditors to repay your obligations over time. An IVA must be set up by an insolvency practitioner.

An IVA can be tailored to your specific needs, but it can be costly, and there are hazards to consider. An IVA can be used to pay off most debts, but there are certain exceptions.

How does it work?

An IVA must be put up by a certified individual known as an insolvency practitioner. This is likely to be a lawyer or an accountant. The IVA will be charged by the insolvency practitioner. These are frequently high and are depending on the amount you repay through the IVA. Throughout the duration of the IVA, the insolvency practitioner will deal with your creditors. Please note we do charge for this solution and we refer our IVA’s to Netchwood Finance who will co-operate with you for the service. Alternatively, you can go to Money Advisor, Citizen Advice Bureau and Step Change Charity where their services are free.

IVA Repayments

If you decide to get an IVA, you will work out a repayment plan with an insolvency practitioner. This might be in the form of regular instalments, a flat amount, or a combination of the two. The repayment plan should be based on an amount you can afford, and the creditors must agree to it. If you make monthly payments, the IVA will typically last 5 or 6 years.

Any repayments will be made to the insolvency practitioner immediately. The funds will subsequently be distributed to your creditors. The insolvency practitioner will keep a portion of this to cover their expenses. If your payments are insufficient to pay off your obligations in full by the end of your IVA, you will not be required to pay the interest

Debts included in an IVA

overdrafts
credit cards
gas and electric arrears
Council Tax arrears
water arrears
catalogues
personal loans
payday loans
store cards
income tax and national insurance arrears
tax credit or benefit overpayments
debts to family and friends
other outstanding bills, for example solicitor’s costs, invoices for building work and vets bills
Personal Guarantees
Bounce Back Loans (Sole Traders Only)
Suppliers
Family

Debts cannot include in an IVA

maintenance arrears that have been ordered by a court
child support arrears
student loans
magistrates’ court fines
Social Fund loans
TV licence arrears

Amount of debt that can be included

An IVA might contain any amount of debt. The law establishes no minimum or maximum restrictions. An IVA has hefty costs, therefore if your total debt is less than £10,000, an IVA may not be the best alternative.

The maximum number of debts that can be included

Any number of debts can be included; however, an IVA is usually preferable if you have more than one creditor. You will need to get 75% or more for the IVA to be approved by the creditors.

Do you have to pay for an IVA?

You usually have to pay for an IVA to be set up. This is due to the fact that an IVA may only be established by a professional lawyer or accountant known as an insolvency practitioner (IP). Their rates might be considerable and vary based on the scope of the task. There are no professional or legal criteria on how much IPs should charge, although prices are often in the £5,000 range.

Advantages of an IVA:

You make low-cost monthly payments for 5 or 6 years. (If you have a lump payment, you can offer a full and final IVA)
Unsecured debts that remain after an IVA is completed are wiped off.
An IVA can help you safeguard your home
An IVA stops creditors from taking further action or adding further interest or charges to their debt
Protocol Compliant IVAs provide your Supervisor the authority to grant payment breaks and prolong the agreement if payments are missed

Things to Consider:

Certain assets, such as windfalls, investment properties, and savings, may not be protected
Protocol compliant IVA’s provide that you must look to refinance your residential property in year 5 and if this is not possible, you can introduce a lump sum or pay 12 extra contributions instead
If you do not follow the conditions of the agreement, the IVA may fail. Creditors will then pursue you for the remainder, and if you owe them more than £5,000, they may potentially apply for your bankruptcy.
An IVA requires creditors to vote on whether to accept, modify, or reject the arrangement, and any obligations accumulated after the date of approval are not eligible for inclusion in the solution.
An IVA requires you to stick to a set budget for the duration of the agreement, and you are not permitted to take on additional credit without the approval of your Supervisor
Any debt that is not included in the IVA will remain unpaid
Your credit rating will be damaged for 6 years, and information about your arrangement will be entered into the insolvency record