Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) is an agreement with your creditors to pay all or part of your debts. You agree to make regular payments to an insolvency practitioner, who will divide this money between your creditors. An IVA is a legally binding agreement which usually lasts for 5 years.
Money Helper has information on organisations that can give you free advice about whether an IVA is right for you. This debt solution is not available if you live in Scotland.
Your insolvency practitioner works out what you can afford to repay and how long the IVA lasts. You’ll have to give details about your financial situation, for example your assets, debts, income and creditors and your credit rating will be affected.
Your insolvency practitioner will contact your creditors. The IVA will start if the creditors holding 75% of your debts by value agree to it. It will apply to all your creditors, including any who disagreed to it.
An IVA will stop your creditors taking action against you for your debts.
Your IVA can be cancelled by the insolvency practitioner if you do not keep up your repayments. The insolvency practitioner can make you bankrupt.
If there is equity in your home, you will need to try to re-mortgage which may result in a higher interest rate or, if no re-mortgage is available, the IVA may be extended for an additional 12 month.
You may still be able to keep your business running, if you have one.
Your IVA will be added to the individual insolvency register. It’s removed 3 months after the IVA ends.
Advantages of an IVA
- A way to avoid bankruptcy
- Make one affordable manageable monthly contribution
- You only repay what you can afford after taking into account your personal circumstances
- Legal action by your creditors is stopped, as long as you make your IVA monthly contributions
- The interest on your debts is frozen
- Any debt included in your IVA, that you have not repaid at the end of your IVA, is written off
- You could become debt free in five years as once you’ve made your final contribution, any remaining debts within the IVA are written off
- No upfront fees are charged – the Nominee and Supervisor fees are deducted from your agreed monthly contribution
- You will stop paying interest on your debts from the day your IVA proposal is approved and for the duration of the IVA, as long as you continue to make your agreed contributions
- An IVA stops unsecured creditors harassing you
- Creditors and debt collectors can’t legally pursue debt repayment once an IVA is in place, whether they agree to the IVA or not
- An IVA means you reach an agreement with your creditors whereby they cannot bankrupt you if you maintain the agreed IVA contributions
Disadvantages of an IVA
- A fee is charged by both the Nominee and the Supervisor in respect of these services, both of which are included within your contribution and the time frame
- Your credit file will be affected and the footprints of an IVA will remain on your credit file for six years
- If you go against the terms of the IVA then you could face bankruptcy proceedings
- It is the decision of your creditors whether or not an IVA proposal is approved
- IVAs typically include a “windfall” clause, which means if you come into some money (e.g. an inheritance) this is taken into account and you could be required to make increased payments or contribute all of any windfall
- If your income increases (salary, bonus or overtime) throughout the lifetime of the IVA your monthly contribution may increase
- Any debts that can’t be included in your IVA will be your responsibility to pay, for example court fines, student loans or money owed under family court proceedings (these debts will be considered when calculating your expenditure to ensure that payments to these debts can be maintained throughout the duration of your IVA)
The costs involved in an IVA are:
- A nominee fee
- A supervisor fee
The nominee fee is the cost for helping you to put the IVA proposal to your creditors. This is subject to approval by your creditors. Depending on who your creditors are and the amount of your monthly contribution it could be either the first five payments into the IVA, or £2,000.
The Supervisor fee is 15% of any further realisations, to cover the on-going costs of the IVA. So, if you entered into an IVA you'd pay monthly contributions or money from assets to pay the nominee fee at first. Then any remaining money you'd pay towards it would go towards the Supervisor fee.