All you need to know about Individual Voluntary Arrangements.

As with any debt solution, it is important that you speak to an FCA authorised debt advisor before committing.

What is an IVA?

A formal debt solution, which means that it is legally binding on all parties to it.
An agreement between you and your creditors (the people or companies that you owe money to) to repay a set amount each month for a period of usually 5 years.
Stops your creditors from being able to pursue you any further for the money that you owe and stops them adding further interest and charges.
At the end of the IVA term, providing that you have abiding by its terms throughout, any debts remaining are usually written off in full.

Who can apply for an IVA?

How do I know if I am eligible For an IVA?

You must owe at least £6,000
You must be able to show that you do not have enough money left over at the end of each month to cover all of your payments, and that you owe more than the value of your assets.
You must owe money to at least 2 different creditors.
You must be able to make a monthly repayment towards the debts included in your IVA (the amount that you pay will be based on how much you can afford to repay and NOT the amount that you actually owe). So, you must have some disposal income left, once all of your main living expenses have been paid, to make a contribution towards your IVA.

How do I apply for an IVA?

To apply for an IVA you will need the assistance of an Insolvency Practitioner.
As a first step, you will need to speak to a debt advisor (such as ourselves) who will be able to help you decide whether applying for an IVA is the right solution for you. We will talk you through the process and explain all of the pros and cons.
If an IVA is the right solution for you, our Insolvency Practitioner will you to draft a proposal that will then be sent to your creditors for agreement.

What is an IVA proposal and what does it contain?

An IVA proposal includes information about your current financial position and how your proposed monthly repayment towards the debts included in your IVA have been calculated. This proposal is then sent to your creditors explaining how you intend to repay a proportion of your debt and why you are unable to repay the full amount.

Your proposal is then considered by all of your creditors. They will vote on whether the IVA proposal should be accepted. At least 75% (by value of debt) of the creditors must agree otherwise the proposal will be rejected and you will be unable to go ahead with the IVA.

If your creditors do not agree to the proposal, you will remain liable for the full amount of the debts. If your proposal is accepted, a proportion of your debts will be written off at the end of its term.

Is there a fee that I need to pay?

Your IVA practitioner does charge a fee for setting up and managing your IVA but it is included in your monthly payment.

You should never have to pay any additional money over and above the monthly payment agreed with your Insolvency Practitioner and which is included in your proposal.

The average fee for an IVA in England is £3,650. This cover the cost of your Insolvency practitioner drafting your proposal, managing the meeting to agree your proposal and supervising your IVA over the course of its duration.

Will my credit rating be affected?

As with any formal debt solution, entering into an IVA will have an impact on your credit score.

If you live in England or Wales, details of your IVA will be added to the Individual Insolvency Register, which contains a list of everyone who is using an insolvency solution. Anyone can search the register.

Once you have completed your IVA, a record of it will remain on your credit file for a period of 6 years.

What happens during an IVA?

Once your IVA has been approved, you will make a single monthly repayment towards all of your debts. You will send this repayment directly to your Insolvency Practitioner who will then disperse it between your creditors.

Your Insolvency Practitioner will be on hand throughout the duration of your IVA to answer any questions that you may have. It’s important that you fully understand all of the details of your IVA so that you know what you can and cannot do.

If you don’t abide by the terms of your IVA it could fail, in which can you will become fully liable to your debts again.

Once a year your Insolvency Practitioner will arrange a review of your IVA account (your annual review). Your Insolvency Practitioner will review your income and outgoings to determine whether any changes to your IVA need to be made. If you have received a wage increase, bonus, in heritance payment or any other increase in your income, you may have to pay more into your IVA.

Your Insolvency Practitioner is there to support you throughout your IVA. If you have any questions or queries, or if you are experiencing further financial difficulties, your Insolvency Practitioner will be on hand to help and guide you.