IVA – Individual Voluntary Arrangement
What Is An IVA?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement with your unsecured creditors to pay all or part of the debts you owe to them, this includes credit card debt and personal loans. You agree to make regular payments to an Insolvency Practitioner (IP), typically for five years, and the IP will divide this money between your creditors in proportion to the amount you owe them.
Once all payments due under the terms of your IVA have been made, any remaining balance of debts is written off.
If you own your home and there is any equity in it, you may have to realise part of this by way of remortgage or by additional payments.
- Creditors who vote against your proposal or who do not vote at all are still bound by it
- Creditors whose lending is unsecured can’t take any further action
- Interest and charges are frozen by law as long as you keep up your payments
- Your insolvency practitioner will help you prepare your proposal, including agreeing the level of your household and personal spending based on guidelines acceptable to creditors
- You make only a single payment each month. Your insolvency practitioner is responsible for administering and distributing your payments
- If you are a homeowner, the terms of an IVA will enable you or your spouse or partner or a relative to make arrangements to buy your share of any equity in your home or to make extra payments. This may be done through a remortgage or a loan or by additional payments if they are not possible. You will never be required to sell your home in an IVA
- On completion of the IVA, the balance of what you owe your creditors is written off.
- You may be able to continue running any business you have
Disadvantages of an IVA
- Your IVA is entered on a public register. If managing credit card debts is a particular challenge, you may wish to consider a Debt Consolidation Loan, which is a less formal solution, and is not entered on this register.
- If there is some equity (value) in your home after taking account of the mortgage(s) on it, you will probably have to pay for your share, usually in the fifth year of your IVA, by remortgaging the property. If you can’t get a remortgage or secured loan, you may have to continue making monthly payments from your income, for up to another year.
- If your circumstances change, and your practitioner can’t get creditors to accept amended terms, the IVA may fail. You will then still owe your creditors the full amount of what you owed them at the start, less whatever has been paid to them under your IVA.
- If your IVA fails, interest and charges may be reapplied to your debts for the period from the date you entered into your IVA and in some cases you may be made bankrupt.
IVA Help & Advice
If you think that a IVA could be the right solution – contact Creditfix to speak with one of our advisers and see what’s best for you and your situation. .
Call us now for immediate and confidential free debt help & advice on 0808 208 5198 or complete the form. We can start to work through our debt problems as soon as you contact us. An IVA is only available to residents living in England, Wales and Northern Ireland. If you’re currently living Scotland you may be eligible for a Trust Deed.
To qualify for debt write off in an IVA, you must have a minimum of £5000 of qualifying unsecured debt owed to two or more creditors. A debt write off amount of between 25% and 75% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
IVA – Individual Voluntary Arrangement Frequently Asked Questions
The IP will prepare and issue a Proposal to your creditors to show how much you can afford to pay each month and whether you have any other assets that may be used to provide additional funds.
Your creditors can then vote on whether to accept or reject it. Not all creditors need to vote but at least 75% (by value) of those who do vote must vote in favour for it to be accepted.
If it is accepted then all of your creditors, including any creditors who voted against it or who did not vote at all, are bound by the terms of the IVA and cannot take any other action.
As long as you make all payments due and dealt with any equity in your home then at the end of the agreed term any balance of debts remaining is written off.
Payments to any secured creditors such as a mortgage, secured loan on your home or a hire purchase agreement must continue to be made and they are not included in the IVA. An allowance will be made for these payments in calculating the amount you can afford to pay each month.
The IP will charge a fee for preparing the Proposal, issuing it to your creditors and negotiating with them to achieve approval. This is referred to in law as the Nominee’s fee.
Thereafter the IP will charge a fee known as the Supervisor’s fee for collecting your payments, sharing them out amongst your creditors and for carrying out certain other statutory duties which will include an annual review of your circumstances to ensure that you are paying a fair amount to your creditors.
These fees will not be charged on top of the payments you make each month. They are deducted from those payments before the IP shares the balance of those payments amongst your creditors.
Records of IVAs are normally held on credit reference agency files for six years from the date the IVA began. This can significantly affect your ability to get further credit. If the IVA lasts longer than six years, it will remain on your credit file until the date the IVA ends. The IVA is marked ‘complete’ by the credit reference agency when they are informed of this by the Insolvency Service. Make sure you send a copy of the letter from your IP to the three credit reference agencies so that your credit file is updated.
You may continue to find it difficult to get credit even after the IVA has been removed from your credit file. This is because some lenders may ask if you have ever had an IVA or been bankrupt in the past. This will depend on the lender’s policy.