What Is An Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) is a formal and legally binding agreement between an individual and their creditors. Its primary purpose is to help individuals repay their debts at a manageable rate over a specified period.

Managed by a qualified insolvency practitioner, the IVA offers protection against further actions from creditors. Once the terms of the IVA are successfully met, a portion of the debt is typically written off.

During the IVA, individuals make regular payments based on what they can afford after essential expenses. These payments are then distributed among the creditors.

The arrangement provides a structured way for individuals to address their debts without resorting to bankruptcy. However, it’s essential to note that while an IVA offers a path to debt resolution, it also impacts one’s credit rating and financial status.

What are the benefits of an IVA?

IVAs offer numerous advantages, such as:

  • Protecting assets like your home from being repossessed
  • Stopping creditor harassment and legal action
  • Potentially improving your credit score over time after successful completion

In 2020, over 70,000 people in the UK entered into an IVA, with a success rate of around 65% and an average debt write-off of approximately 60%. IVAs have been available in the UK since 1986, providing a viable debt solution for many individuals.

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The IVA Process: How it Works Step by Step

An Individual Voluntary Arrangement (IVA) is a formal debt solution involving steps to help individuals manage their debts effectively.

Initial Consultation

  • The process begins with an initial consultation with an insolvency practitioner (IP).
  • The IP assesses the individual’s financial situation and determines whether an IVA is suitable.

Proposal Creation

  • If deemed appropriate, the IP creates a proposal outlining the repayment plan.
  • The plan typically lasts for five to six years and considers the individual’s income, assets, and living expenses.

Creditors’ Approval

  • The proposal is presented to the individual’s creditors for approval.
  • At least 75% of the creditors by value must agree to the terms for the IVA to be approved.

IVA Management and Support

  • Once approved, the IP oversees the arrangement, ensuring that the individual adheres to the agreed-upon repayment plan.
  • The IP provides ongoing support throughout the duration of the IVA, including regular reviews of the individual’s financial situation.
  • The IP makes necessary adjustments to the repayment plan if circumstances change.

The Role of IVA Helpline

  • We play a crucial role in this process by offering expert debt help and advice to individuals considering an IVA.
  • Our team of professionals guide individuals through each step of the process.
  • We ensure individuals understand their options and receive the support they need to regain control of their finances.

IVA Helpline: Expert Advice and Support

We offer free, confidential advice from experienced debt advisors, providing personalised debt solutions tailored to your individual circumstances.

Our ongoing support throughout the IVA process ensures you regain control of your finances and work towards a debt-free future.

With our expertise, authority, and commitment, you can trust us to help you navigate the complexities of IVAs and achieve financial stability.

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The Cost of an IVA: Fees and Payment Structure

The cost of an Individual Voluntary Arrangement (IVA) can vary depending on the complexity of your financial situation and the Insolvency Practitioner (IP) you choose to work with. Typically, the fees associated with an IVA include:

  • Nominee Fee: Covers the setup and proposal of the IVA.
  • Supervisor Fee: Covers the ongoing management of the IVA throughout its term.

These fees are usually incorporated into your monthly IVA payments, ensuring that you do not face any upfront costs. It is important to note that fees can differ between IPs, so comparing and understanding the fee structure is crucial before committing to an IVA.

Is an IVA Right for You?

To determine if an Individual Voluntary Arrangement (IVA) is the appropriate debt solution for your financial situation, it is essential to assess your income, expenses, and outstanding debts. Key factors to consider include:

  • Affordability of monthly IVA payments: These payments are based on your disposable income after accounting for essential living costs. Ensure that you can manage the monthly payments.
  • Types of debts: IVAs cover unsecured debts such as credit cards, personal loans, and overdrafts. Secured debts, like mortgages, are not included in an IVA.
  • Impact on credit rating and future borrowing ability**: An IVA will negatively affect your credit score for six years, potentially limiting your access to credit during this period. However, successfully completing an IVA can lead to an improved financial situation and credit standing.

Consulting with our IVA Helpline is crucial in determining if an IVA is the most suitable debt solution for your situation. Our experienced advisors provide tailored guidance based on your unique financial circumstances, ensuring that you decide on the best course of action for managing your debts.

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Eligibility Criteria: Can You Apply for an IVA?

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between a person and their creditors, intended to help manage and ultimately clear unsecured debts. To apply for an IVA, an individual must meet specific criteria:

  • The individual must have a minimum unsecured debt of at least £6,000 owed to two or more creditors.
  • The individual must have a regular income to make the agreed monthly payments towards their debts.
  • The individual must be a resident of England, Wales, or Northern Ireland, as IVAs are not available in Scotland.

Determining if an IVA is the right debt solution for a particular situation depends on various factors, including the individual’s financial circumstances, the nature of their debts, and their ability to make regular payments. An IVA may be suitable if the individual is struggling to meet their debt repayments, has a regular income, and wants to avoid bankruptcy.

At the IVA Helpline, our team of expert debt advisors can help assess your financial situation and provide tailored advice on whether an IVA is the most appropriate solution for your circumstances.

To ensure you make an informed decision, seeking professional advice and exploring all available debt solutions is crucial before committing to an IVA.

What Debts Can Be Included in an IVA?

An Individual Voluntary Arrangement (IVA) is a debt solution designed to help individuals struggling with unsecured debts. IVAs can include various types of debts, such as:

  • Personal loans
  • Credit card debts
  • Overdrafts
  • Store cards

Additionally, IVAs can also cover outstanding:

  • Utility bills
  • Council tax arrears
  • Tax debts owed to HM Revenue and Customs

However, it is important to note that secured debts, such as mortgages and secured loans, cannot be included in an IVA. Furthermore, certain types of debts, like student loans, child support arrears, and court fines, are also excluded from IVAs.

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Advantages of an IVA

An Individual Voluntary Arrangement (IVA) offers several advantages for managing debt, making it an attractive option for those struggling with financial burdens.

  • Single, affordable monthly payment: An IVA allows for a single monthly payment based on your current financial situation, which can alleviate the stress of managing multiple debts.
  • Fixed period with debt write-off**: An IVA typically lasts for a fixed period, usually five years, after which any remaining debt is written off, providing a clear path towards financial freedom.

Disadvantages of an IVA

Individual Voluntary Arrangements (IVAs) can be an effective debt solution for some, but they also come with certain disadvantages.

  • Impact on credit rating: An IVA will remain on your credit file for six years, making it difficult to obtain credit during this period.
  • Inflexibility: IVAs have strict monthly payments that may not accommodate changes in your financial situation.
  • Risk of failure: If you cannot maintain the agreed payments, it could lead to bankruptcy

Frequently asked questions

  • How long does an IVA last?

    An Individual Voluntary Arrangement (IVA) is a debt solution designed to help individuals struggling with unmanageable debt by consolidating it into a single, affordable monthly payment. Typically, an IVA lasts for a fixed period of 5 years, during which the debtor is required to make regular payments to their creditors through an insolvency practitioner who acts as the intermediary.

    In some cases, the duration of an IVA may be extended to 6 years if the debtor owns a property and is unable to release equity to contribute towards their debts (House of Commons Library, 2019).

    It is important to note that the duration of an IVA can vary depending on individual circumstances and the specific terms agreed upon with creditors. In some instances, an IVA may be completed in a shorter time frame if the debtor is able to make a lump sum payment to settle their debts (StepChange, 2021).

    Once the IVA term is successfully completed, any remaining unsecured debt is written off, allowing the debtor to start afresh without the burden of their previous financial obligations (Citizens Advice, 2021).

  • What happens if I miss a payment in an IVA?

    Missing a payment during an Individual Voluntary Arrangement (IVA) can have serious consequences for both the debtor and the overall success of the debt solution. One of the primary risks associated with missed payments is the potential for the IVA to fail, which may result in the debtor facing bankruptcy or other legal actions from creditors.

    Additionally, missed payments can lead to increased interest and charges on the outstanding debt, further exacerbating the debtor’s financial situation.

    At IVA Helpline, we understand the importance of maintaining regular payments throughout the IVA process. Our team of experts is committed to providing support and guidance to help you navigate the complexities of debt management and ensure the successful completion of your IVA.

    If you are struggling to meet your payment obligations, we encourage you to reach out to us as soon as possible. By working together, we can explore alternative solutions and develop a plan to get your IVA back on track, minimising the potential consequences of missed payments and safeguarding your financial future.

  • Can I still use credit while in an IVA?

    During an Individual Voluntary Arrangement (IVA), it is generally not advisable to use credit, as the primary purpose of an IVA is to help individuals manage and eventually clear their existing debts. In fact, most IVA agreements include specific terms and conditions that prohibit the debtor from obtaining further credit without the prior consent of their Insolvency Practitioner (IP).

    This is to ensure that the debtor does not accumulate additional debt, which could jeopardize the success of the IVA and their overall financial stability.

    However, in certain exceptional circumstances, it may be possible to obtain credit during an IVA, but only with the explicit approval of the IP.

    This could be the case if an individual requires credit for essential purposes, such as emergency home repairs or medical expenses. In such situations, the IP may grant permission for the debtor to obtain a limited amount of credit if it does not negatively impact their ability to meet their IVA repayments.

    It is crucial to note that any attempt to obtain credit without the IP’s consent could result in the failure of the IVA and potential legal consequences.

  • Will my creditors stop contacting me once I enter an IVA ?

    Entering into an Individual Voluntary Arrangement (IVA) can provide significant relief for individuals struggling with debt, as it serves as a legally binding agreement between you and your creditors. One of the primary benefits of an IVA is that it typically prevents creditors from contacting you directly once the arrangement is in place.

    This means that the insolvency practitioner managing your IVA will handle any communication regarding your debts, allowing you to focus on meeting the agreed-upon repayment terms without the added stress of dealing with creditors.

    It is important to note, however, that this protection is contingent upon your adherence to the terms of the IVA. Should you fail to meet your repayment obligations or otherwise breach the terms of the agreement, creditors may regain the right to contact you and pursue legal action to recover the outstanding debt. As such, it is crucial to work closely with your insolvency practitioner and maintain open lines of communication to ensure that you remain in compliance with your IVA and continue to enjoy the benefits it provides (The Insolvency Service, 2021).

  • What happens to my assets in an IVA?

    During an Individual Voluntary Arrangement (IVA), your assets may be affected depending on their value and necessity. An IVA is a legally binding agreement between you and your creditors, which allows you to repay a portion of your debts over a fixed period, typically five years. As part of this agreement, your Insolvency Practitioner (IP) will assess your financial situation, including your assets, to determine a reasonable monthly repayment amount.

    In most cases, essential assets such as your home and vehicle will be protected, provided that you maintain the agreed-upon payments. However, if your property has significant equity, you may be required to release some of it to contribute towards your IVA. This can be done through remortgaging or a secured loan. If you own a high-value vehicle, you may be asked to sell it and purchase a more affordable one, with the proceeds going towards your IVA.

    Non-essential assets, such as additional properties, investments, or valuable collections, may be included in your IVA and sold to repay your creditors. Discussing your assets with your IP to ensure that you fully understand the potential impact of an IVA on your financial situation is crucial. Remember, our team at IVA Helpline is here to provide expert debt help and advice throughout the process.

  • How can my finances and liabilities be managed in relation to IVA Debt Solution?

    In an Individual Voluntary Arrangement (IVA) context, managing your finances and liabilities is crucial for both the debtor and the creditor. One key strategy is establishing a realistic and sustainable monthly repayment plan, which considers the debtor’s income, essential living expenses, and other financial commitments.

    This ensures that the debtor can consistently meet their repayment obligations without compromising their basic needs, while the creditor receives a fair and steady return on their investment.

    Another important strategy is to maintain open and transparent communication between all parties involved in the IVA process. This includes regular updates on the debtor’s financial situation, progress towards meeting repayment targets, and any changes in circumstances that may affect their ability to fulfil the terms of the IVA.

    By fostering a collaborative and supportive environment, both the debtor and the creditor can work together to address any challenges that may arise and minimize the risk of default or legal disputes.

    Finally, it is essential to engage the services of a qualified and experienced insolvency practitioner (IP) to oversee the IVA process. The IP acts as an impartial intermediary between the debtor and the creditor, ensuring that the terms of the IVA are fair, legally compliant, and in the best interests of both parties. By entrusting the management of the IVA to a reputable IP, both the debtor and the creditor can have confidence in the integrity and effectiveness of the debt solution.

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