An Individual Voluntary Arrangement or IVA is a legally binding debt repayment agreement between you and your creditors in which you come to an arrangement with people you owe money to. It helps those in financial difficulties to make a formal proposal to settle their debt. IVA’s were introduced by the government as part of the Insolvency Act in 1986 as an alternative to bankruptcy. An IVA allows you make one single manageable monthly payment, based on your budget, over a five year period. After that the remaining debt is usually wiped clean, leaving you completely debt-free. Due to its formal nature, an IVA has to be set up by a licensed professional.
An IVA is available to anyone with debts over £15,000 and a stable income, who are experiencing creditor pressure. IVA’s are particularly useful for individuals who own their own property and wish to avoid the possibility of losing it in the event they are made bankrupt. Any unsecured debts can be included within an IVA for example; bank accounts, finance company loans, credit or store cards, outstanding VAT, catalogues, personal loans, student loans and outstanding Inland Revenue debts. Some debts cannot be included within an IVA such as; vehicle HP, mortgage arrears, magistrates court fines, speeding/parking tickets, CSA arrears and debts incurred through fraudulent activity.
An IVA proposal has to be prepared by a licensed Insolvency Practitioner (IP) who then presents it to your creditors at a creditors meeting. Your creditors will be called upon to vote either for or against the arrangement with or without modifications. Providing 75% in value terms of those that have voted, vote to accept the proposals, then the IVA is agreed. You will be then put on a payment plan where you will pay an affordable, set amount each month, usually for a period of five years. This amount is distributed between your creditors based upon how much you owe each one. A supervisor will be appointed to ensure the proposals are adhered to and to distribute the dividends to your creditors. An Individual Voluntary Arrangement or IVA is legally binding. As long as you keep up your repayments, when the term of your agreement is finished, any outstanding balances will be written off and you will be then free to make a fresh financial start.
Once the IVA is approved you are legally contracted to keep up your monthly IVA payments. Once accepted your creditors cannot make any more demands of you. Whilst taking out an IVA, you can apply to the court for an interim order that prevents your creditors from proceeding with a bankruptcy petition while the order is in force. Nevertheless, your creditors can still force you into bankruptcy if you do not meet the requirements of the IVA agreement. Under an IVA, assets such as your home are protected and interest and charges on your loans will be frozen. However whilst the Individual Voluntary Arrangement is in place you are not allowed to take out any further unsecured credit such as personal loans, store cards and credit cards. At the end of the IVA process the supervisor will give you a Statement of Completion, normally within three months of the final payment. A copy of this will also be sent to the Insolvency Service for their records and you will be debt free.