Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement (IVA) is a formal, legally binding arrangement between you and your creditors allowing you to pay one affordable monthly amount towards your debts, usually over a 5 year period. At the end of this time, the remainder of the debt will be written off as long as you have maintained payments. Normally you will have debts of at least £15,000 in order to qualify for an IVA.

Individual Voluntary Arrangements were introduced in the 1980s as an alternative to bankruptcy, allowing individuals to pay something towards their debts. This was also a better alternative for creditors as they often ended up with nothing in a bankruptcy.

How to set up an Individual Voluntary Arrangement

Only an Insolvency Practitioner (IP) can set up an IVA for you. The IP will draw up your IVA proposal after gathering all of your relevant information, such as income and expenditure. 75% of your creditors need to agree to your proposal, based on debt balances rather than the number of creditors you have. So for example, if you have £50,000 of debt, creditors whose balances together total £37,500 (75%) need to agree.

There are fees involved in arranging an Individual Voluntary Arrangement, but reputable companies usually don't charge for advice or any up-front fees. The IP fees are usually factored into the IVA arrangements, meaning that they are deducted from the amount you pay to your creditors each month. All of this information would be discussed with you and agreed by you beforehand.

It's extremely unlikely you will lose your home through signing an Individual Voluntary Arrangement, as long as you stick to the terms of it. You may be required to release some of the equity in it halfway through the final year of the IVA. A specialist mortgage advisor would help you with this.

Advantages of an Individual Voluntary Arrangement:

  • An IVA is a formal legally binding arrangement
  • One fixed monthly payment to cover all your debts
  • It will last for a fixed period of time, normally 5 years
  • Your balances won't increase as interest and charges must legally stop after the date of the IVA
  • Creditors can no longer demand payment or pursue you for money
  • It generally won't affect your employment

Disadvantages of an Individual Voluntary Arrangement:

  • If you have assets or significant equity in your property, these may have to be realised for the benefit of your creditors
  • You will not have access to credit during the term of the IVA forcing you to live within your means(but you are allowed to change your mortgage deal)
  • You must include all your creditors
  • If you fail to maintain payments, it could result in bankruptcy
  • Your credit rating will be affected for around 6 years
  • You will pay more to your creditors than with bankruptcy, as a typical IVA lasts 5 years

Find out more about an Individual Voluntary Arrangement

For all you need to know about Individual Voluntary Arrangements, please contact us for some free, no obligation help and advice.

Campbell Dallas Debt Solutions - if you have debt problems, we have debt solutions.

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