Individual Voluntary Arrangement (IVA)

Individual Voluntary Arrangements are know as IVAs. They are a binding contract between you and your creditors (the people you owe money to). The agreement states that you will make fixed monthly payments each month into your IVA, and in return they will accept lower payments over a fixed term and write off unsecured debt that has not been repaid in this time.

You may qualify for an IVA if you have £10,000 of debt or more to 3 or more creditors. The criteria are not that simple though, the ‘I’ of IVA stands for Individual and you should be aware that each IVA is different based on an in depth assessment of your circumstances.

Unlike Debt Management Plans (DMPs), which are a less formal debt solution, IVAs have a fixed term, usually 5 years. At the end of the IVA, any remaining unsecured debt will be written off. Although you may be required to raise some money by remortgaging your house, again depending on your circumstances.

How does an Individual Voluntary Arrangement (IVA) work?

Step 1 – your first call to us

You can either call us for free on 0800 083 4646 or complete the form on the right for a free call back. We will go through your finances with you to assess your eligibility for a Debt Management Plan. We do this for two reasons, first is that an IVA can take 6 weeks or more to process and if we get you started on a DMP, we will make things easier for you in the short term. The second reason is that there is no guarantee that an IVA will be accepted by your creditors, so in case it is not agreed, it is sensible to have a back up plan.

Step 2 – your IVA proposal

On your initial phone call, as a result of the DMP assessment, we will also assess your basic eligibility for an IVA and, if appropriate, pass you onto our IVA assessment team for a full assessment.

If we feel that an IVA may be appropriate for your circumstances, we will send you out an application form and begin drafting your IVA. We will keep in close contact with you and your creditors during this period in order to make sure that the information is correct.

Step 3 – meeting of creditors (MOC)

When we have drafted your proposal, we will send it out to your creditors so that they can consider it. We will then arrange a “by proxy” meeting where each of your creditors can vote by post as to whether to accept your IVA proposal. The meeting is not normally at the meeting, but you may if you wish.

Step 4 – your IVA has been approved

In order for your IVA to progress 75% of your creditors will need to agree it. Hopefully, as it does in 75% of cases, your IVA will be accepted, after which your case will be passed to our supervision department. This is where your IVA will be looked after for you. A case handler will be appointed as a dedicated contact should you have any problems or need to ask questions.

IVA example

At this point, we must point out again that an IVA is very much an individual arrangement and that no two are the same. This is just an example aimed to help you understand how they work.

Jeffrey is a civil servant, whilst he lives with his girlfriend; she is unaware of the level of his debts. If made bankrupt he would possibly loose his job.

Before his Individual Voluntary Arrangement (IVA)

Jeffrey owed money to 9 creditors, which totaled £15,499.04. It is difficult to say how long this would have taken to pay off, due to the different end points of each debt.

Equidebt (overdraft) – £1,035.50 with a payment of £750.00

Welcome Financial Services (loan) – £7,108.95 with a payment of £181.00

Moorcroft Debt Recovery (mobile contract) - £520.04 with a payment of £20.00

Fredrickson International (loan) – £559.37 with a payment of £48.00

Allied International Credit (utility bill) – £347.39 with a payment of £50.00

Royal Bank of Scotland (credit card) – £1,396.03 with a payment of £45.00

Capital One (credit card) – £201.18 with a payment of £10.00

Moorcroft Debt Recovery (store card) – £412.45 with a payment of £16.00

Moorcroft Debt Recovery (loan) – £3,868.13 with a payment of £171.00

His monthly payments add up to £1,291, which is more than he earns each month. Three of the debts were with debt collection companies because he was completely unable to pay what he owed.

During his Debt Management Plan (DMP)

Prior to his IVA being accepted, we placed him on a debt management plan, this helped to keep his creditors happy and improved the chances of them voting in favour of his IVA. We assessed his disposable income (DI) to be £120 per month, which is what he paid into the DMP. At this rate, it would have taken over 13 years to pay off his debt.

During his Individual Voluntary Arrangement (IVA)

It took 3 months to get his IVA passed, during which his disposable income (DI) increased to £160 per month due to an improvement in his budgeting.

He will pay £160 per month for 5 years from the inception of the IVA. Meaning that he will pay only £9,600 into his IVA.

He has no equity in any property or significant assets, so at the end of this term his outstanding unsecured debt will be written off. From the money paid into his IVA, he will pay £5,100 in fees to the Insolvency Practitioner. These fees were agreed by the creditors as part of the IVA. Fees are different in every case.

What are the benefits of an Individual Voluntary Arrangement (IVA)

An IVA will:

• Consolidate all your debts
• Give you a date on which your debt will be cleared
• Reduce your monthly outgoings in line with what you can afford
• Freeze your interest and charges
• Stop letters and phone calls from your creditors
• Stop debt collectors and bailiffs form calling you

What are the potential drawbacks of an Individual Voluntary Arrangement (IVA)

An IVA, like all other financial solutions has potential drawbacks. None are definite, but we feel it appropriate to outline them so that you can make an informed decision.

• You will be tied into the agreement for the term
• Your details will be recorded on the insolvency register
• You will not be able to get any additional credit
• Failure to comply with the IVA may lead to bankruptcy
• Your credit file may be affected