IVA (Individual Voluntary Arrangement)

What is an IVA?

An Individual Voluntary Arrangement (IVA) could be a way to avoid bankruptcy, keep your home and become free of your unsecured debt – usually after five years.

An IVA is a legally binding agreement between you and your creditors. With the help of a licensed Insolvency Practitioner, you put forward proposals to creditors to agree to repay as much as you can reasonably afford, usually over 5 years, after which any remaining debt is written off - as long as you have made all your payments.

Once your proposal is finalised and you are happy with it, a meeting of creditors will be called where creditors will vote on whether or not to accept your proposal. This is not a physical meeting and creditors usually vote by proxy. Creditors will only accept the proposal if they believe it to be in their best interest and in some cases will only agree if certain conditions (known as modifications) are met which you must also agree to before the IVA can be formally approved. These will be fully explained to you and you will be given time to consider whether you want to proceed. Not all creditors will vote, but for an IVA proposal to be approved, 75% of the voting creditors by debt value must agree to it.

If the IVA is approved your details will be placed on the Individual Insolvency Register.

An IVA is only available for residents of England, Wales and Northern Ireland.

IVA qualifying criteria

You must be insolvent, which means you can’t repay your debts as they fall due, or that your debts are more than your other assets
You can only obtain an IVA by using the services of a licensed Insolvency Practitioner, who will act initially as a “Nominee” to assist you to prepare all the necessary documents to present to your creditors. Once your IVA is approved, an Insolvency Practitioner will be appointed as a “Supervisor” for the duration of your IVA to oversee and administer it in line with the terms of the accepted proposal.
You must have a disposable income each month to be able to make a payment towards your debt – this means that you have some money left over after all your monthly expenses have been taken care of.

Advantages of an IVA

A way to avoid bankruptcy
Make one affordable manageable monthly contribution
You only repay what you can afford after taking into account your personal circumstances
Legal action by your creditors is stopped, as long as you make your IVA monthly contributions
Once your IVA is approved, the interest on your debts is frozen and no further charges can be added to it, meaning your debt level won’t increase
Once you have made all of your payments into your IVA as agreed, any remaining balance due to your creditors will be written off. You will be released from your IVA and your creditors cannot chase you for the balance
No upfront fees are charged – the Nominee and Supervisor fees are deducted from your agreed monthly contribution
An IVA stops unsecured creditors harassing you
Creditors and debt collectors can’t legally pursue debt repayment once an IVA is in place, whether they agree to the IVA or not

Disadvantages of an IVA

A fee is charged by both the Nominee and the Supervisor in respect of these services, both of which are included within your contribution and the time frame
Your credit file will be affected and the footprints of an IVA will remain on your credit file for six years
If you do not keep up with your IVA payments your IVA may be terminated and your creditors will be free to add interest and charges and pursue you for the debts. You could even face bankruptcy proceedings
It is the decision of your creditors whether or not an IVA proposal is approved
IVAs typically include a “windfall” clause, which means if you come into some money (e.g. an inheritance) this is taken into account and you could be required to make increased payments or contribute all of any windfall
If your income increases (salary, bonus or overtime) throughout the lifetime of the IVA your monthly contribution may increase
Any debts that can’t be included in your IVA will be your responsibility to pay, for example court fines, student loans or money owed under family court proceedings (these debts will be considered when calculating your expenditure to ensure that payments to these debts can be maintained throughout the duration of your IVA)
There may be a requirement to release equity in the final year of the IVA if you are a homeowner

Fees & Charges

No upfront costs will be charged, but your Insolvency Practitioner will charge fees for their services. These fees are usually split into Nominee fees and Supervisor fees and are typically a combined total of £3,650.

The Nominee fee covers the work undertaken to assist you in drafting your proposal and convening your meeting of creditors, right through to the outcome of the meeting.

The Supervisor fee is for the ongoing administration and supervision of your IVA and includes annual reviews and reports issued to you and your creditors.

Your creditors must approve these fees as they will be paid out of your monthly contributions, usually before your creditors receive any payment. Sometimes they will modify the fees at the meeting of creditors.

If your IVA is not accepted by your creditors, you won’t be charged any fees for the work the Insolvency Practitioner has done to that point.

Help and Advice

If you’re considering an IVA as a solution to your debts, complete our online form today and see if you qualify and find out how much debt you could write off.