Individual Voluntary Arrangement (IVA)
What is an IVA?
An IVA is a legally binding arrangement overseen by an Insolvency Practitioner. To consider an IVA you will need a debt level of £6000 or over and be unable to afford to maintain your contractual payments. The IVA is a 60 month arrangement and at the end of the term any remaining debt is written off. The payments are based on affordability, not what creditors may request. IVA’s were established as part of the insolvency act in 1986 and is a formal way for individuals to avoid bankruptcy.
*To qualify for an IVA, there are criteria that will need to be met. The debt write-off amount is dependent on the financial circumstances of each individual. This solution and the debt write off amount of each customer is subject to creditor approval.
Why apply for an IVA?
Before deciding an IVA is the best option, it is beneficial to speak to a debt advisor so they can discuss all available options, and assess your circumstances – for instance your assets, income / expenditure and who you owe money to. This will ensure you are considering the most suitable solution for your circumstances.
Advantages
- An IVA offers you legal protection from your included creditors
- An IVA usually has a fixed term of 60 months/ 5 years, and at the end of the arrangement, any outstanding balances on included debts will be written off
- The payment you make into an IVA is based on your Income and Expenditure so should always be affordable to you
- There are no set up fees for an IVA
- There are fees included in the IVA but they are incorporated into the monthly repayments and agreed by your creditors
- Interest and charges on included debts will be frozen
- If you are a homeowner you’ll usually be able to keep your home, as long as you maintain your mortgage / secured loan payments
- If you have a lump sum to offer this can be paid in as ‘full and final’ settlement or a combination of a lump sum followed by monthly payments
Disadvantages
- Any debts not bound by your IVA will remain outstanding
- Your credit file will be affected for 6 years and you will be restricted from obtaining credit during the IVA. Your ability to obtain credit may also be affected
- An IVA can impact on certain jobs such as those in finance and the Civil Service, if you are unsure check your employment contract
- Homeowners may be asked to re-mortgage 54 months into the IVA; if this is not possible you may be required to extend your IVA by a further 12 months. A re-mortgage may attract higher interest rates
- Failure to keep up with IVA payments may result in your creditors filing for your bankruptcy
- Restrictions will be placed on your expenditure once entering in an IVA
- Some creditors may not approve an IVA Proposal
- Because this is a formal solution your details will be placed on a publicly viewable register