What is an IVA (individual voluntary arrangement)?

An IVA (Individual Voluntary Arrangement) - is a formal agreement between you and your creditors where you will come to an arrangement with people you owe money to, to make reduced payments towards the total amount of your debt in order to pay off a percentage of what you owe then generally after 5 years your debt is classed as settled. Due to its formal nature, an Individual Voluntary Arrangement - IVA has to be set up by a licensed professional called an Insolvency Practioner (IP)

The point of an IVA?

An IVA is a legally binding agreement which is bewteen you and the people your in debt with (your creditors). It’s purpose is to help people in debt struggling to afford their repayments and propose something to help them cut down and settle their debts.

How does it help

Your payments to your creditors are based on your income and made to a level which is affordable to you under the IVA. Once you have ran the course of the IVA, the rest of the unpaid debt is offically and legally written. Upto 65% of your debt can be written off (depending on your circumstances).

How does an IVA work?

The debts you owe to your creditors are paid back within a fixed period, usually 5 years. All charges and interest is frozen and the creditors are not allowed to demand any additional payments for you once under an IVA.

When the decision has been made that an IVA is right for you and you do qualify for one, your financial situation needs to be looked into so a decision can be made on the amount you can realistically afford to pay back to your creditors on a monthly basis. This is based on information you give to the company providing you with the IVA. Then when the amounts are agreed with yourself (the debtor) and your creditors a proposals needs to be checked, signed and sent to a IP (Insolvency Practitioner).

Then an application may be made to the courts for an Interim Order. When this is in place your creditors are unable to take any legal action against you. For the IVA to be approved and to go ahead your creditor have to vote “for” or “against” the arrangement. If one of your creditors votes “for” the IVA will be approved, but if one votes “against” the IVA arrangement and represents less than 25% of your debt the decision will be put back to a later date and all your other creditors will be contacting and asked for there votes. So if the creditor who voted “against” the IVA represent over 25% of the total your owe the IVA will not be approved. This happens because the IVA can only be approved if 75% in value is voted “for” by your creditors. If some of your creditors don’t vote on a meeting day the IVA can be approved by the creditors who have voted.

An IVA is legally binding for as long as the payments are paid and when the agreement is finished (normally 5 years) you become free of all your debts, and sometimes paying back as little as 35% of the total amount you owe. During the IVA your financial state is regularly inquired into to see if your situation has changed.

An IVA is prepared by a IP (licensed Insolvency Practitioner) and is presented to your creditor.