An individual voluntary arrangement, or IVA, is an agreement between you and your creditors to repay what you owe in a way that is affordable to you.
An IVA can be in the form of a lump sum or several payments spread over a period of several years, or monthly payments spread over 60 months - depending on whether you own a property. IVAs generally last between five to six years.
If you need advice on whether an IVA is the best debt solution for you, please request a callback from our Debt Advisory team.
How would an IVA affect me?
An IVA is a legal agreement between you and your creditors where they must freeze interest and charges and all contact is made through your Insolvency Practitioner. Your creditors are asked to accept the lower payment due to your circumstances, which are reviewed on an annual basis. At the end of the IVA any sum left owing is legally written off. It remains on your credit file during the IVA and for one year after the end of the IVA.
To set up an IVA you will have to speak to an insolvency practitioner (IP). The IP will act as a middleman between you and your creditors, and can help you draw up a repayment proposal based on your individual situation.
Once you and your IP are satisfied with your proposal, your IP will arrange a meeting of your creditors where they will either agree or reject your proposals. If your creditors all agree and your IVA is accepted, the IVA becomes legally binding.
An accepted IVA is ‘protected’. This means that your creditors cannot contact you or pursue you for any debt acquired before the IVA was accepted. Even creditors who didn’t agree to your IVA cannot pursue you for outstanding debt.
What are the advantages of an IVA?
- Payments are affordable and spread over a period of around five to six years.
- Payments can be a lump sum or a combination of an initial lump sum followed by monthly payments.
- Your chosen Insolvency Practitioner acts as your Trustee and deals with your creditors for you.
- After the IVA becomes protected your creditors cannot pursue you for your debts.
- Once your IVA term is over, your remaining debts will be written off.
What are the disadvantages of an IVA?
- If you are a homeowner you may have to re-mortgage your house.
- If you cannot re-mortgage you will have to make up to 12 extra payments.
- Your IVA will be listed on the Individual Insolvency Register, but will be removed 3 months after the IVA ends.
- Your credit rating will be affected.
- There are setup and handling fees involved in an IVA.
- If you fail to keep up with your payments, your IP can force you into bankruptcy.
Who is eligible for an affordable repayment plan?
IVAs can be flexible and are assessed on a case-by-case basis. However, an IVA is likely the right choice for you if:
- You are a UK resident (excluding Scotland),
- You have debts exceeding £10,000,
- You have at least two creditors,
- You have a willing insolvency practitioner to act as a third-party.