An individual voluntary arrangement (IVA) is a formal & legal agreement, between you and your creditors, that agrees a monthly repayment plan over a period that combines multiple unsecured debts into one affordable, monthly payment. It is a formal, legal debt solution negotiated by an Insolvency Practitioner that both you and your creditors are obliged to stick to. The Insolvency Practitioner will deal with your creditors throughout the life of the IVA, freeing you from any stress and worry dealing with them directly. An IVA is a form of insolvency, but it is different from bankruptcy.

How Does an IVA Work?

If you decide to proceed with an IVA, you will work out a repayment plan with an insolvency practitioner. The repayment plan is presented to your creditors, and upon agreement, you will pay back a set amount each month, usually for five years, but not always. Since an IVA proposal is usually a last resort for people who cannot afford repayments currently, most creditors recognise you are making an effort to repay what you owe.

Write Off Debt With an IVA

Legislation means that you may be entitled to write off a large portion of your debt based on your circumstances, affordability, and the full amount of debt. IVAs are suitable for people with a considerable debt level and as such you are only expected to pay back what is reasonably affordable for you on a regular basis.

Benefits of an IVA

• An IVA can protect your owned assets, such as your home, by preventing your creditors from forcing you to sell up to pay them back.
• All interest and charges on your unsecured debts, including your credit cards and store cards, are frozen from the date an IVA is approved.
• On approval, any current or potential legal action relating to your unsecured debts is prevented; this also stops late payment charges and fees from being added, giving you the reassurance that your debt has stopped growing. This does not include debts outside the IVA such as Student Loan, Child Maintenance arrears, fines, secured debts, or the current years council tax.

Disadvantages of an IVA

• Not all debts can be included in an IVA, for example secured debts, student loans, child support and maintenance, magistrate court fines and social fund loans are excluded from an IVA, but an allowance can be given to enable you to continue repaying these.
• Creditors may not approve your IVA.
• If you become entitled to any windfalls or inheritance money during the term of the IVA these funds are to be introduced into the arrangement.
• If you fail to make the payments due under the terms of your IVA, your arrangement could fail, which in turn could lead to you being made bankrupt.

Are There Fees on an IVA?

Before entering an IVA, you need to be aware that there are fees involved. Your creditors are agreeing to accept less money back and will approve fees payable to your insolvency practitioner. These fees will be outlined in your IVA Proposal, and agreed or amended, upon approval of your IVA following any changes made by your creditors. Should you receive a windfall during the course of the IVA, or have a significant change in circumstances, these fees may vary. Should funds be sufficient, you may be required to repay your debts in full plus fees due within the terms of your arrangement.

Will an IVA work for me?

An IVA can be a positive way to manage your debts, however, to be eligible you must:

• Have £6,000 or more of unsecured debt.
• Owe money to two or more creditors.
• Live in England, Wales, or Northern Ireland.
• Have a steady income and consistently be able to make at payment of at least £85 per month.