IVA - Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors which states that you will pay back as much debt as you can afford over a fixed period. Once this period has expired, any remaining unsecured debts will subsequently be written off.

If accepted by 75% of voting creditors (by debt value), an IVA will give you complete legal protection from all unsecured creditors, even if they did not vote. This means that an IVA provides you with peace of mind, along with a simple and affordable debt payment structure. A typical Individual Voluntary Arrangement (IVA) lasts for five years and is supervised by a licensed Insolvency Practitioner who must ensure it is fair and reasonable for both you and your creditors.

John can afford to pay £400 each month towards total unsecured debts of £60,000. Over 5 years he pays back a total of £24,000.

After fees of £4,000, a total of £20,000 is paid to his creditors and the remaining £40,000 (66%) is written off.

Is an IVA right for me?

While an Individual Voluntary Arrangement (IVA) is seen as a favourable alternative to bankruptcy, it is not always the appropriate debt solution. An Individual Voluntary Arrangement (IVA) is available to those who have combined unsecured debts normally around £13,000 or more, owed to two different creditors or more.

An IVA could be the right debt solution for you if you have a regular income and can maintain a regular payment towards your debts, but cannot afford to keep up with your current multiple debt repayments across various payment dates.

If you cannot afford a regular payment towards your debts, you could consider a full and final settlement or bankruptcy. If you would like to speak to a Debt Release Direct advisor to discuss your options, you can call for FREE on 0800 019 7465.

What are the advantages of an IVA?

• Payments are fixed and agreed in writing at the start of the IVA
• Your creditors will write off the remaining balance outstanding upon completion.
• Once your IVA is completed you will be debt free (excluding any secured creditors)
• Although you may need to remortgage or release equity in your home, you are usually allowed to keep your property.
• The IVA won’t jeopardise any reasonable assets you have. Necessary vehicles are usually excluded.
• Your IVA terms are legally binding, protecting you from further action from your creditors providing you stick to the agreement.
• If your circumstances change, a new proposal (typically called a variation) can be put to your creditors to take the changes into account. For example a reduction in income or unemployment.
• Your IVA will not be published in a local or national paper, meaning that your friends and family need not find out.
• Business owners can continue to trade under an IVA.
• Unlike in bankruptcy, there is normally no requirement to declare that you have had an IVA on future loan applications.

What are the disadvantages of an IVA?

• Payments usually continue for 5 years, but this period can be longer or shorter depending on your own proposal.
• If your IVA fails, you may be in a similar or worse financial position than before, or could be made bankrupt by your creditors.
• For the duration of your IVA you will not be able to take out any further credit without the consent of your Insolvency Practitioner.
• Your IVA will adversely affect your credit rating for up to 6 years.
• IVAs appear on the insolvency register.
• Homeowners may be asked to re-mortgage to release equity for the benefit of creditors, or the IVA may be extended if re-mortgage is not a available.

How does an IVA work?

After receiving the expert IVA advice you need from a Debt Release Direct advisor, our in-house insolvency practice Varden Nuttall Ltd can negotiate an Individual Voluntary Agreement with your creditors, on your behalf, meaning that you can consolidate debt or write off remaining debts without having to file for bankruptcy.

Your IVA will be designed around your individual financial situation and therefore, you will need to provide details of your income, expenditure and debts so that Varden Nuttall can write a full proposal to your creditors. Once your IVA proposal has been received a creditors meeting is arranged, at which your creditors vote on whether or not to accept your proposal.

If your IVA proposal is accepted, you will simply make a single monthly payment to your Licensed Insolvency Practitioner. This payment will be distributed among your creditors each month.

If you can keep up with your reduced monthly repayments throughout the duration of your fixed IVA term, any remaining unsecured debts will be written off upon completion.

If you decide that an IVA is the right solution for you then we will refer you to our in-house insolvency practice Varden Nuttall Ltd. If we have done preparation work then we will request a one-off administration fee for the work done by Debt Release Direct Ltd. Any IVA proposal will be based on only what you can afford during a fixed period, and will include both payments to your creditors and also fees for the legal supervision of your IVA by a licensed Insolvency Practitioner. Each case is unique, and full details will be provided in writing in your IVA proposal.

For more information regarding fees and costs of an IVA, please read “A Creditors’ Guide to Insolvency Practitioners Fees” here.