IVA’s

An Individual Voluntary Arrangement is a legally binding agreement between you and your creditors which will normally last 5 years. You will then be expected to pay anything that you can afford outside agreed reasonable living costs. An IVA has to be set up by a licensed professional called an Insolvency Practitioner (IP) and all unsecured debts must be declared into an IVA. The IVA will be monitored during the full term to ensure that the terms and conditions that were agreed between both parties are adhered to. It is your responsibility to pay the IP who will then ensure that the creditors receive the agreed payment.

An IVA helps people in financial difficulties to form a plan to settle their unsecured debt within a reasonable time-frame. Creditors will not be allowed to demand additional payments and all interest and charges will be frozen.

Everything is based purely on what is affordable to you each month; this is calculated before any agreement takes place and is based on your monthly income and expenditure. Your financial situation will be reviewed annually to see if there has been any change in circumstances. Once the final payment is made, any outstanding debt is legally written off, which can sometimes mean a significant portion of your unsecured debt, sometimes as high as 75%.

If you are a homeowner your home is never at risk however, in some cases, at the end of the 5 years you may be required to release some of the equity in your home to cover any outstanding unsecured debts.

National Debt Advice uses some of the best debt management consultants in the UK to decide whether an IVA is right for you. Once a decision has been made, your consultant will be required to give you an assessment of your current financial situation. This information must be as accurate as possible in order to calculate the most precise repayment amount for you. Your creditors will then be asked to vote either for or against the approval of your IVA.

The IVA that you sign up to is legally binding and therefore you must keep up with your repayments. The good news is, as soon as your agreement is finished, you will be free from debts regardless of how much is paid off.

Any person in debt can consider an IVA. An IVA can be set up for anyone with any type of profession, as your ability to undertake an IVA is not determined by your job but you must be incapable of repaying your debts.

Usually your personal debts must be above £15,000 and you should have 3 or more different creditors but this can depend on your personal circumstances. You must also be able to offer a reasonable monthly payment to your creditors. This will vary depending on individual circumstances and debt amounts.

These include but are not limited to:

• Credit cards
• Personal loans
• Overdrafts
• Catalogues
• Store cards
• Outstanding balances after home or vehicle repossession
• VAT
• Council Tax Arrears
• Business loans for which you are personally liable
• Inland Revenue

These will normally involve secured debts:

• Mortgage arrears
• Vehicle HP
• Student loans
• Fines (such as parking offences)
• Rent

• You will not be facing a bill if you decide to undertake an IVA.
• You will only have to pay your agreed reduced monthly payment.

• Debt Free in 5 Years
  An IVA will last for a fixed period of time, usually no longer than 5 years.
• No more calls and No more demand letters
  As soon as your IVA is agreed, your creditors are no longer allowed to demand payments from you either by telephone or letter – by law.
• All interest and Late Payment Charges are Frozen
  Once the IVA has been agreed, your creditors cannot add further charges or interest to any of your accounts covered by the agreement – by law.
• Single Monthly Payment
  Your payments are reduced to one affordable amount each month
• Repaired Credit Rating
  Upon completion of your arrangement, your credit rating will start to improve and you will be eligible to start borrowing again. You will not be credit blacklisted for life.
• Fixed, Legally Binding Agreement
  An IVA is legally binding. You can keep track of your payments and balance at all times.
• Protection from Court Action
  Your creditors will not be allowed to take further legal action against you as long as you stick to the terms of the IVA agreement.
• A Private Agreement
  An IVA is a strictly private agreement between you and your creditors.
• Professional Status Unaffected
  An IVA will not affect your professional status. You can carry out an IVA without any adverse effects to your job.

• Possible Release of Home Equity
  If you have any equity in your property or any other significant valuable assets, you may be required to release some or all of this as part of the IVA agreement.
• No Unsecured Borrowing During the Arrangement
  For the duration of the IVA you will not be able to use your store or credit cards, but it may be possible to change an existing mortgage or take a new one while you are in an IVA. You will be able to use prepaid cards.
• Maintaining payments for the IVA duration
  Failure to keep up your IVA payments may result in bankruptcy. However, you may be able to take payment holidays or miss payments for extreme circumstances, but this will extend the period of your IVA.
• Decreased credit rating
  You will not be able to borrow for the duration of your IVA but your credit rating will not be as badly damaged as if you went bankrupt.
• You must include all creditors
  You must include all of your creditors and you cannot make separate arrangements with each one.

• Step 1: You will review your entire financial situation with a debt advisor and agree on one affordable monthly amount to be repaid.
• Step 2: A formal written proposal for your creditors is drafted.
• Step 3: Your creditors will be contacted with your proposal
• Step 4: A meeting is held for the creditors to discuss your proposal. If 75% of the value of the creditors accepts, then the proposal becomes legally binding on all creditors.
• Step 5: The court and all creditors are formally informed of the result of the meeting.
• Step 6: Maintain your monthly payments into the IVA for the length of time agreed.
• Step 7: Once your payments have been fulfilled, you will be free from your debts and any outstanding balance will be written off.

During your IVA:

• All monthly payments will be administered for you.
• Your financial situation will be reviewed once a year.
• If your circumstances change for the worse during the period of your IVA or you cannot maintain the agreed payments, then your creditors can be asked to vary the terms of your proposals or agree to a payment holiday.
• If your circumstances have changed for the better, you may be asked to increase your monthly payments accordingly.

Important: It is likely that the IVA will fail if you are unable to re-start your payments. Your creditors will then be able to take other action against you and alternative arrangements must be made.

National Debt Advice uses trained advisors to give advice on Individual Voluntary Arrangements and recommend the most appropriate action for your needs – whether that is an IVA or another solution. For more free advice on IVA’s or any other debt related issues, please take a few seconds to fill out the simple enquiry form on this page.