Individual Voluntary Arrangement

What is an IVA?

An IVA is a legally binding contractual agreement between an individual and their creditors, overseen by an insolvency practitioner (who will firstly act as your Nominee and following approval as the Supervisor of the arrangement). The agreement normally allows for an income contribution to be paid for a period of 5 years (can be longer, if required) and will also include your owned assets, if applicable. Following successful completion of the arrangement, you will be discharged from all remaining debts and can look forward to a debt free future.

How do I apply for an IVA?

First of all, you should take advice from a licensed insolvency practitioner. After it is agreed that you will proceed with an IVA you will prepare a proposal with the help of your nominated insolvency practitioner who, at this stage, will act as your Nominee.

The IVA proposal is considered by creditors in the following way:

· The proposal contains details of your income and expenditure, Statement of Affairs and other statutory documents.

· A meeting of creditors will then be called and your creditors will vote to accept or reject your proposal.

· For the IVA to be approved, 75% in value of voting creditors must agree to the proposal, provided this is achieved then the IVA will proceed as agreed.

· If agreed, then all of your creditors will be legally bound to your IVA.

· If agreed, your Nominee will then act as your Supervisor to ensure you adhere to and fulfil the terms of the IVA.

· The meeting of creditors could be adjourned for a maximum period of 14 days to clarify any issues raised by creditors.

· If the IVA proposal is rejected, you can reconsider your position and make an amended proposal to creditors or you can consider one of the other available solutions.

What are the qualifying criteria for an IVA?

In general you will be able to apply if:

You currently live in or have lived in England/Wales/Northern Ireland within the last 12 months, or have a place of business in one of those countries
You have unsecured debts of at least £6,000
You are unable to pay your debts as they fall due and/or your liabilities are greater than your assets
You are able to pay a monthly contribution from income and/or have realisable assets that will enable an acceptable return to creditors

Once approved, how does an IVA work?

Once approved, your Supervisor’s main duty is to collect your income contributions for a 5 year period, realise your assets and, in general, supervise proceedings to ensure the IVA performs as per the terms of the arrangement.

From the funds collected, your Supervisor will also make periodic payments to your creditors, as per the terms of the arrangement.

It is essential that you co-operate fully with you Supervisor for the duration of your IVA by providing all requested information, keeping your Supervisor up to date with any changes to your income or expenditure, advising of any changes to your contact details and, as far as possible, maintaining your agreed payments. In any event, your Supervisor will review your income and expenditure at least annually.

At the end of your IVA you will be discharged from all remaining debts and can look forward to a debt free future. If, for whatever reason, you are unable to fulfil the terms of the arrangement then you would be issued with a termination notice meaning you will be handed back your debts and will need to consider other options, such as bankruptcy.

Do I Qualify

Advantages of an IVA

Your creditors cannot take legal action against you for recovery of any debt outstanding as at the date the IVA was approved.
You no longer have to deal with your creditors – your insolvency practitioner negotiates with them on your behalf and will deal with all future contact, removing the constant phone calls and distressing mail.
Interest, fees and charges are frozen – your creditors can only claim for the outstanding balance due to them as at the date the IVA was approved.
Your home and other assets can be retained, subject to value and creditor acceptance
You make one, affordable monthly payment, calculated after an allowance has been made for your general living expenses and household bills.
An IVA does not involve court proceedings
Spouses or partners can have their IVAs administered together in interlocking IVAs.
An earnings arrestment will be stopped upon approval of the IVA.
All remaining debts will be written off at the end of the IVA
If your circumstances change during the period of the IVA then your arrangement can be varied or you could be granted a payment break.

Disadvantages of an IVA

Your credit rating may be adversely affected
An IVA may result in you being refused credit, before or after your discharge is granted
Creditors may reject the IVA proposal in sufficient value, causing it to fail
You may not be able to act as a Director of a limited company unless the company’s articles of association allow you to act as a Director whilst insolvent
Your current employment or future employment prospects may be affected by entering into an IVA
Your IVA will be registered on the Individual Insolvency Register, a publicly available online register of all insolvencies in England & Wales
Equity in your property and/or other assets you own may have to be realised for the benefit of your creditors
Student loans are not discharged in an IVA

Find out more

Contact an expert money adviser at Harper McDermott to find out more about the debt solutions available to you. We are here to help you decide the best course of action to suit your individual needs and support you every step of the way. If you would like a fresh start, get in touch today!

If you live in England, Wales or Northern Ireland then an Individual Voluntary Arrangement (IVA) might be the right solution for you to solve your debt problems

What is an IVA?

How do I apply for an IVA?

What are the qualifying criteria for an IVA?

In general you will be able to apply if:

Once approved, how does an IVA work?

Advantages of an IVA

Disadvantages of an IVA

Find out more

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