(not available in Scotland)

IVA’s are Individual Voluntary Arrangements. These are contractual and legal arrangements between a debtors and their creditors to repay their debts at a reduced rate and generally over a reduced period. For some people IVA’s do offer a quicker and more definite route to clearing debt than a debt management plan.

To qualify for an IVA the debtor must be “insolvent”. This typically means that the debtor’s unsecured debts outweigh their assets (often equity held in their home) and also that they are unable to repay their debts when they fall due for repayment.

An IVA is often used as an alternative to bankruptcy. It can help to protect assets (such as a home), avoid the publicity connected with bankruptcy, and often enables a better return for creditors.

To qualify for an IVA you will generally need more than £15000 of unsecured debts distributed around at least three creditors or more. You would generally need to be in a position to repay £200 per month or more towards the debts for the duration of the IVA (which is typically five years). These figures are guidelines and every case is different. The site support team are available to discuss your case should you wish to; an IVA may be possible in certain circumstances even if the above criteria are not met.

Some people are able to contribute lump-sums into an IVA. This might be from the sale of an asset or a contribution from a family-member or friend. In these cases a different type of IVA might be possible whereby the lump sum is an alternative to making contributions over a period of years.

If you have assets they will be taken into account in an IVA. For example if there is equity in your home you are likely to be required to release some equity during the IVA (for example by remortgaging) to assist in repaying creditors.

You will need to secure the services of a Licenced Insolvency Practitioner to work with you on your IVA proposal. It is their job to work with you to establish a reasonable level of repayment to creditors and to gain the agreement of your creditors to the arrangement.

If 75% of your creditors agree to the proposal put forward (or do not object to it) the IVA will be binding on all creditors. This provides you with protection against any further recovery activity on the debts.

Provided you meet the commitments made in your successful IVA proposal you will no longer be responsible for any remaining debt at the end of the agreed IVA term.

Avoidance of bankruptcy, protecting a home, and a defined repayment period are all major advantages of IVA’s.

The selection of a good Licenced Insolvency Practitioner is extremely important. Just as with Debt Management Companies the quality of service varies greatly between firms. Should you wish the site support team can guide you towards an Insolvency Practitioner who specialises in cases similar to yours and who has received excellent client and professional feedback in the past.

Anyone entering into an IVA should carefully clarify with the Licenced Insolvency Practitioner the implications for their house. While it appears a significant amount of your debts may be written off you could find in reality these unsecured debts are partially transferred into secured debt on your home (through an increased mortgage) that could take many extra years to repay.

In recent times creditors have tightened the criteria they use to decide whether to accept IVA’s. For this reason many people find they are unable to get into an IVA and need to look at alternative options.

IVA’s also have a significant effect on credit records and ratings which is likely to be similar to bankruptcy. Previous IVA’s may also need to be declared on mortgage applications for many years after an IVA is completed even if it is no longer viewable on a credit record or rating.

Like all debt solutions there are significant advantages and disadvantages that go along with using an IVA to solve debt problems. These factors vary between person to person based on their unique personal circumstances. Please feel free to contact the site support team if you’d like to discuss whether an IVA could be the right solution for you.

For further details about IVA fees and the work that is conducted Click Here.

Warning: If your IVA fails: As a significant amount of your payments into an IVA are taken first to meet your Insolvency Practitioner’s fees, if your IVA fails you will remain liable for the balance of your debt and any insolvency practitioner fees and costs already incurred.