Individual voluntary arrangement (IVA)
What is an IVA?
What fees will I have to pay for an IVA?
Advantages & Disadvantages
What is the process for getting an IVA approved?
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement which is reached with creditors for the settlement of compromise of outstanding debts.
It is usual for the payment to be on deferred terms and for less then the full amount due (i.e. at a rate of pence in the pound).
Even though full repayment may not be made, once the agreement or arrangement is complete, the individual is exonerated from any balance outstanding. The slate is wiped clean. If the individual is a property owner they maybe required in the 4th year of the arrangement to revalue their home and release equity to pay off some or all of the debt.
The Individual Voluntary Arrangement (IVA) process is aimed at providing an alternative to bankruptcy. The costs are much less than bankruptcy and the process enables a greater return to creditors. In essence, a win / win situation.
Individual Voluntary Arrangements are not appropriate for all individuals. Therefore, before embarking on the procedure, you should ensure that you have sought independent and impartial advice from one of our experienced insolvency personnel.
What fees will I have to pay for an IVA?
You will be charged a fee equating to fours months voluntary contributions for drafting the IVA proposals and dealing with your creditors. Thereafter, the monthly payments that you make into your approved arrangement will cover the payments to your creditors as well as the insolvency practitioner’s fees for dealing with the meeting of creditors and supervising the arrangement. In short, the creditors agree that they will accept a lower return from the arrangement.
Advantages Disadvantages
You may only pay back a percentage of your debts.
You only have to make one monthly payment or in some cases, a one-off lump sum.
An Individual Voluntary Arrangement is legally binding so that your creditors cannot change their minds once they have agreed.
Once the IVA is in place your creditors cannot bring any other action against you as long as you maintain your agreed monthly payment.
You are able to operate a 'normal' bank account as long as it does not have an overdraft facility.
No publicity in the local papers.
It may safeguard your property.
An IVA does not affect your professional status.
IVA's are only suitable if you or another person can afford to make an offer of repayment to your creditors.
Your creditors have to agree on the arrangement through a vote. However we will not suggest this course of action to you unless we think there is a good chance that your creditors will accept your offer.
If you do not make the payments to the IVA it is likely that the Arrangement will fail and your creditors will be able to take other action against you. It may also result in your bankruptcy.
It will be noted on your credit record.
What is the process for getting an IVA approved?
In every case, the first step is to assess whether an Individual Voluntary Arrangement (IVA) is the most suitable solution for you. If we feel that it is not or you decide that it is not what you want to do, we will always suggest an appropriate alternative.
Once we have established that an IVA is appropriate, we will work together with you to determine how much you can realistically afford to pay into an arrangement. To do this we will need to ask you a number of questions about your financial situation. We will then discuss the figures with you and agree on a monthly repayment to your creditors. Alternatively, a one-off lump sum may be offered to creditors in full and final settlement of their claims; for example, by re-mortgaging your property. Other aspects of your financial situation will also be discussed such as the value of your assets. We will also need to ensure that all your creditors (lenders) are included within the arrangement.
When your IVA proposals are drawn up and you are happy with them, you will need to sign them and return them to us. In some cases we may make an application to court for an Interim Order. When this is in place your creditors cannot take any action against you and we can hold a meeting so that your creditors can consider your IVA proposals. If enough of your creditors (75% in value of those creditors who vote) agree to your IVA proposals the arrangement will become legally binding on them. All you then have to do is make the agreed payments. Once you have fulfilled the terms of your arrangement you will be free from your debts, even if you have only repaid a fraction of what is owed.
Where the IVA is based on monthly contributions from your surplus income over a period of time we will conduct regular reviews of your income and expenditure during the arrangement. If during the period of your IVA you find that you cannot meet the agreed payments we can ask your creditors if they will agree to vary the terms of your proposals. We want your IVA to succeed and will do everything we can to help you through it.
We can assist you in drafting your proposals for an IVA.
For specialist, confidential advice contact the UK Debt Helpline on 0808 100 3190 or 08000 644 666
