what is an iva

What is an Individual Voluntary Arrangement (IVA)?
An Individual Voluntary Arrangement is a contract between you and your creditors. You pay an agreed monthly sum, usually for 5 years. This is divided up between people you owe money to, who accept the sum in settlement of the amount you owe them.

So how much will I be required to pay?
The monthly payment depends on your income and expenditure, and is agreed so that it will be affordable to you. A standing order authority will be set up and your first payment must be made within one month after your IVA proposal has been agreed with the people you owe money to.

What sorts of people enter into IVAs?
Simply people who cannot pay their debts. If you cannot pay your debts as they fall due, you are insolvent and the law gives you two alternatives – bankruptcy or an IVA.

Are there any other options?
You could get all of the people you owe money to, to reschedule your debts, but this may be difficult if you have a lot of people you owe money to. Some banks and building societies have debt counsellors, and you could try speaking to them. Bear in mind that unlike an IVA, an informal arrangement offers no guarantees. One or more of the people you owe money to could change their mind at a later date, or charge you higher rates of interest later if your circumstances improve. You may also take longer to finally clear your debt.

What are the advantages of an IVA?

• We help you to calculate what you can afford, and you make just one payment to your client account by standing order each month. The payment amount is the same over the whole period unless your circumstances change and you can afford more. Typically, your circumstances will be reviewed annually.
• Once your IVA is approved, all of people you owe money to are legally bound by its terms, as long as you keep paying your agreed monthly sum.
• Once the agreed term of your Individual Voluntary Arrangement is over (usually after 5 years) you have no further obligations to people you owe money to. At this point you stop paying the monthly sum, and can start afresh.
• Your employment will probably not be affected. In fact, your employers will not know about your IVA unless you choose to tell them.
• Unlike bankruptcy, your details will not be advertised in the local press and you are not excluded from running a business, nor will it lead to many professions terminating your employment.

What are the disadvantages of an IVA?
Check out our comparison of IVA Pros and Cons.

What do I need to do?
Before your IVA proposal is put to people you owe money to you need to sign it as a “Statement of Truth”. You do not need a solicitor for this: you simply read it and sign it. We prepare all documentation for you and also contact people you owe money to on your behalf (and if necessary we will make an application on your behalf to your local County Court for an “Interim Order”).

A meeting of people you owe money to will then consider your proposal. You will not usually need to attend as typically the voting is done by proxy instead. Even if people you owe money to do attend, the meeting usually only lasts for between 15 – 20 minutes. We will chair the meeting, and you need to be available at the end of a phone line during this period.

What else should I know?
You might actually pay more out in an IVA than you would if you were made bankrupt. This is because bankruptcy income contributions usually only last for 3 years, whereas contributions in most IVAs last for 5 years. This voluntary increase in the total payment should make people you owe money to sympathetic to your proposal.

Will my home be safe?
You will not usually have to sell your property when in an Individual Voluntary Arrangement. If you do own your home, you need to take reasonable steps at the end of the five year period to make any equity available to people you owe money to (usually by re-mortgaging). This requirement is also true for bankruptcy, except that bankruptcy often means you do have to sell your home.

What if people I owe money to don’t agree?
At least 75% of votes (in value) at a meeting of people you owe money to must be in favour of your proposal. People you owe money to can suggest modifications to your proposal and you can choose whether to accept them or not.

If people you owe money to don’t vote in favour you will still have the option of an informal arrangement, or bankruptcy.

Do I have to pay any costs?
In an IVA all you pay is the amount you can realistically afford, each month for the period of your arrangement (usually 60 months), and that is literally all you have to pay as long as you keep up the payments. In return, people you owe money to agree to write off the debt you can’t afford to repay and pay our fee out of the payments you have made to them.