IVA

What is an IVA (Individual Voluntary Arrangement)?

An Individual Voluntary Arrangement (IVA) is a formal agreement between you and your creditors – formal meaning that you will enter into a contract with your creditors for a period of sixty months (five years) where you agree to pay a set amount until the debt is repaid.

The amount of debt that will be written off ( up to 75% of the debt ) will be determined in the initial stages and will be based on what you can afford to pay on a monthly basis and the overall amount of debt. Please see the example below.

How does an Individual Voluntary Arrangement Work?

During an informal chat with a debt advisor, you will run over your income and expenditure which will take around twenty minutes, we will then be able to determine how much you can realistically afford to offer each of your creditors on a monthly basis over the 60 months.

Proof of income, mortgage or rent and other monthly expenditure may be requested.

The Insolvency Practitioner will draw up a proposal which will be sent to your creditors which will show what you can afford and a detailed report of what your monthly expenditure is,
in some cases the creditors may request modifications to the Individual Voluntary Arrangement proposal. You will be contacted if there is such a request.

A creditors meeting will then be held to discuss the Individual Voluntary Arrangement application and as long as 75% agree to the proposal, the court and all of the creditors are informed, at which point it will become legally binding.

You make your monthly payment to the Individual Voluntary Arrangement for the agreed amount of time and at the end of the set period (usually five years) the remainder of the debt is written off and you are debt free.

  • An Individual Voluntary Arrangement will last for a fixed period of five years, at the end of the term you will be debt free.
  • Your creditors are legally bound by the terms of the agreement.
  • Can be used to prevent bankruptcy proceedings against you.
  • No public notices: an IVA is between you and your creditors.
  • Prevent legal action, including bankruptcy.
An example of how an Individual Voluntary Arrangement Works

Mr Smith
Creditors:5
Initial debt: £46,000
Monthly payment before an IVA: £620 p/m

Monthly payment after an IVA: £368.00 p/m
Debt written off: £23,920
Percentage of debt written off: 52%

Mr Smith earns £19,000 a year.

Four out of the five creditors accepted the proposal which was over the 75% and so Mr. Smith pays £368.00 for 60 months, paying back in total £22,080.

Is an Individual Voluntary Arrangement right for me?

Deciding which Debt solution is right for you really depends on whether your financial situation fits the criteria set out for an Individual Voluntary Arrangement. The total outstanding debt needs to be around £15000 and over, and you will need to be able to afford approximately £200 or more. You will have more than three creditors and feel that you will be able to make a fixed monthly payment for sixty months without interruption. If the answer to these questions is yes then we will be able to look at this as an option for you.

If you are unsure whether it would be the best thing to do right now due to a possible change in your financial position in the future, it would be better to look at a Debt Management plan first which will get the debts under control and regular payments going to your creditors and then move on to the Individual Voluntary Arrangement once you feel more confident.

Have a chat with an advisor who will look at the options and answer any questions you may have and when you make a decision it will at least be an informed decision.

Individual Voluntary Arrangement Question and Answers
Q. Can I arrange an IVA directly with my creditors?

A. No. An Individual Voluntary Arrangement will be drawn up by an Insolvency Practitioner for the contract that both you and your creditors enter into to be legally binding. There must also be an independent party who will oversee your Individual Voluntary Arrangement during its term.

Q. What happens if my income is reduced and I can’t afford my IVA payments?

A. This can be problematic. The key is to make sure that you keep in contact with the supervisor of your Individual Voluntary Arrangement. This is normally the Insolvency Practitioner that set it up. If you feel that this might be possible before entering into the Individual Voluntary Arrangement then Debt Management might be a better option.

Q. Which debts cannot be included in an IVA?

A. Secured loans and items on Hire Purchase cannot be included as part of an IVA. Provisions can be made to allow you to clear debts such as council tax arrears, court fines and CSA arrears outside the Individual Voluntary Arrangement and once they have been cleared, these payments may need to be included in the monthly payment to the Individual Voluntary Arrangement.

If you have other questions you would like answered, please refer to our Debt Management questions and answers page.