UNDERSTANDING IVAs
An Individual Voluntary Arrangement is a formal agreement with your creditors. It can provide a structured way of dealing with unaffordable debt, but there is a formal process to follow and commitments you need to understand.
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors, arranged through a licensed Insolvency Practitioner. You propose how qualifying debts will be dealt with, creditors vote on the proposal and, if it is approved, you must follow its terms. On successful completion, remaining qualifying debts included in the arrangement are dealt with as agreed.
IVAs are available in England, Wales and Northern Ireland; different debt solutions apply in Scotland. An IVA can affect your credit record and assets, and it is important to compare other debt solutions before proceeding.
An IVA is a formal insolvency procedure. It is not simply a repayment plan and it is not suitable for everyone. Your individual circumstances and the other options available to you should be considered before deciding whether to proceed.
THE PROCESS
Every case is different, but these are the main stages you can expect if an IVA is ultimately the appropriate solution.
Before an IVA can be considered properly, your financial circumstances need to be understood. This includes your debts, income, normal household expenditure, assets and anything else that may affect the options available to you.
An IVA should not be considered in isolation. Other ways of dealing with debt may be available and, depending on your circumstances, another solution could be more appropriate.
If an IVA is considered appropriate and you decide to proceed, a formal proposal is prepared. This sets out your circumstances and what you are proposing to your creditors.
Creditors are given the opportunity to vote on the proposal. For an IVA to be approved, the required majority of voting creditors must agree. Creditors may also request changes before accepting it.
Once approved, the IVA becomes binding on you and the creditors covered by it. You must then comply with the agreed terms, including making any required payments and providing information when requested.
If you successfully meet the terms of your IVA, the arrangement can be completed and remaining qualifying balances covered by it are dealt with in accordance with the proposal.
DURING AN IVA
Your income and expenditure will normally be reviewed during the arrangement. Changes in your circumstances can affect what happens next.
An IVA places obligations on you. If you do not comply with its terms and the issue cannot be resolved, the arrangement could fail.
WHEN IT ENDS
Once you have successfully complied with the terms of the arrangement, the IVA can be completed. Remaining qualifying balances included in the arrangement are then dealt with in accordance with its terms.
An IVA will have affected your credit history and your details will have appeared on the public Individual Insolvency Register. Completing an IVA does not immediately remove its impact from your credit file.
COMMON QUESTIONS
These are general explanations. The terms of an individual arrangement and your circumstances determine what happens in practice.
Many IVAs based on monthly contributions last around five or six years, but the length depends on the terms agreed with creditors. Some arrangements, including those funded by a lump sum, may be shorter.
No. An IVA generally needs approval from creditors representing at least 75% by value of the debts of those who vote. There are additional voting rules where connected creditors are involved. Once approved, it normally binds creditors covered by the arrangement, including those who voted against it or did not vote.
Proposed contributions depend on your income, reasonable household expenditure, assets and circumstances. Your creditors consider the proposal, and the amount or other terms may change before approval.
Tell your IVA supervisor promptly if your circumstances change. Depending on the terms and circumstances, a payment break or variation may be considered. If the arrangement fails, creditors may be able to pursue unpaid debts and further insolvency action may be possible.
A GOOD PLACE TO START
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