Individual Voluntary Arrangement (IVA)

An IVA allows qualifying individuals to write off a percentage of unsecured debts included within this formal arrangement which usually lasts five or six years.

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This Guide Includes

1. What is an Individual Voluntary Arrangement?

2. Am I eligible for an IVA?

3. What are the advantages of an IVA?

4. What are the disadvantages of an IVA

5. Debts that can be included in a IVA

6. How to apply for an IVA

7. The role of an Insolvency Practitioner

8. Is my home at risk if I take out an IVA?

9. IVA debt advice

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What is an Individual Voluntary Arrangement?

An IVA, or Individual Voluntary Arrangement, is a legal method of resolving debt problems. It allows a person to repay a percentage of their unsecured debt back to their creditors in affordable monthly installments over a fixed term, usually around 5 years. Once the IVA successfully completes the remaining debt is written off and you’ll be issued with a certificate of completion.

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It is a legally binding arrangement between you (the debtor), and the people you owe money to (debt holders or creditors). IVAs are designed with the sole purpose of allowing you to make affordable and reasonable repayments to all of your creditors at once. This allows you to pay all of your creditors over a set period of time. After making monthly payments for the agreed period (usually five years), your remaining debt is legally written off.

Before you apply for any debt solution you should consider the advantages and disadvantages of the solution and how these may impact you. Our experts will be more than happy to walk you through these and explain them in detail.

Am I eligible for an IVA?

Subject to your individual circumstances, you could qualify for an IVA, if you have unsecured debts of over £5,000 with 2 or more creditors, have a regular income and a monthly surplus of at least £85 after essential expenditures.

In order to qualify for an IVA, the sum of your debts must be greater than the total value of your assets, including your house and any other assets. You also need to be able to make regular monthly payments at a reasonable amount; if you’re currently out of work, or can only offer less than £100 per month in repayments, it’s unlikely that your IVA will be accepted.

Only available to residents in England, Wales and Northern Ireland.

What are the advantages of an IVA?

  • Stops further interest and charges
  • A portion of your debts may be written off
  • The number of monthly repayments are fixed (usually 60 or 72)
  • If approved, all creditors included in your IVA are legally bound by it, awarding you legal protection from further creditor action.
  • Supervised by licenced insolvency practitioners
  • No further contact from your unsecured creditors
  • Your Insolvency Practitioner makes distributes payments to your creditors

What are the disadvantages of an IVA

  • If you fail to meet the conditions of your IVA, the agreement could be terminated.
  • Your credit file will also be affected as you will be declared insolvent through the insolvency register
  • Need 75% or more of voting creditors to approve.
  • You may be required to release equity from your property for the benefit of creditors
  • Your IVA will be listed on the Individual Insolvency Register
  • If your IVA fails, creditors can request the Supervisor to petition for bankruptcy
  • If your monthly income increases or you trigger the ‘windfall clause’, you may have to pay a higher monthly amount into the IVA.

Debts that can be included in a IVA

IVAs are designed to tackle multiple debts at once, there is a list of debts which you can place under one agreement. If you’re struggling with two or more of the following ‘non-priority debts’, an IVA could make repaying all of your debts more affordable.

  • Personal loans
  • Pay day loans
  • Credit cards
  • Store cards
  • Catalogues
  • Overdraft, including fees and charges

There are also ‘priority debts’ which can be placed within an IVA, these priority debts include any council tax arrears you owe, repossessed asset debts, and utility debts such as gas, electricity and water.

Debts that can’t be included in an IVA, such as court orders permitting child support, child maintenance, court fines, or student loans. If you are having trouble making payments to any of these, they must be dealt with separately.

How to apply for an IVA

If you have decided that an IVA is the right option for you, we will put you in contact with a professional insolvency practitioner, should you need further help or advice with the mediation process, we’ll be right here to help.

The role of an Insolvency Practitioner

Your insolvency practitioner has 3 roles to help you get set up and complete your IVA. The first role is as an Advisor, confirming that you understand and are happy with how your IVA will work. At this point, you will have to provide your insolvency practitioner with information about your assets, debts, income, and creditors in order to calculate an affordable sum that you can repay each month. The proposed and agreed budget will ensure that your repayment plans are realistic and that all of your eligible debts are covered by your IVA.

The second role your insolvency practitioner carries out is as your Nominee; once your proposed budget is approved, your insolvency practitioner will pass the terms of your IVA onto your debt holders. If 75% of your creditors and debt holders agree to the terms of your IVA, all of them are accepted into the agreement whether they agree or not. Your insolvency practitioner will inform the courts that your IVA has been approved, and file all the necessary paperwork so you can start making your repayments.

The final role your insolvency practitioner carries out is as a Supervisor; watching over your finances and repayments for the entire duration of the IVA. If you miss any payments, your insolvency practitioner will be there to chase you up and follow up on your financial position. Likewise, if you come into a windfall or a pay increase, your insolvency practitioner needs to be notified in order to properly oversee your IVA.

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Is my home at risk if I take out an IVA?

This will depend on a number of different factors, including the value of the property, who owns the property, and how much is owed on the property.

If you are a homeowner and have equity in your property, you may be required to re-mortgage six months before the end of the arrangement and pay the money released from the re-mortgage into your IVA.

Typically, If you have equity of less than £5,000 you would not be required to re-mortgage.

Re-mortgaging to release equity to pay into your IVA is not restricted in the same way as taking out a new mortgage would be. However, it may still be difficult to find a mortgage company willing to lend to you while you’re in an IVA.

If you can’t re-mortgage, or if it would be too expensive to do this, you may need to make extra monthly payments into your IVA, increasing the term by 12 months. You can also get a third party to provide money for this.

IVA Debt Advice

If after reading this, you think that an IVA would be the right solution for you, contact us to discuss this solution in more detail.

Our expert advisers will give you advice and provide you with all the relevant information needed for you to make a decision that’s best for your situation.

Call now on 0800 121 48 63 or use the contact form on this page.

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