Individual Voluntary Arrangment (IVA)
An IVA is a legally binding, (affordable) agreement between you and your creditors, to repay the whole or part of your debts over a period of time, in usually 3-5 years. These are usually recommended for individuals with debts above £10,000, but more often, higher than that.
Unfortunately, not everyone can qualify for an IVA, as they are generally suitable for individuals with a sustainable and regular source of income, however those who may be able to pay a lump sum, may also qualify.
As in Bankruptcy not all debts are included in an IVA, such as a secured loan, student loans, fines, and child support, however debts such as credit cards, payday loans, overdraft and gas/electric arrears are.
HOW DO I OBTAIN AN IVA?
An IVA is set up by an insolvency practitioner, who writes to your creditors with a proposal using information that you have provided. The proposal may not only just include payments from your income, but may also include you having to obtain a re-mortgage on your house or indeed obtain a cheaper car.
No two IVAs are the same, as they are dependent on the individual and their assets. In order for the IVA to be implemented, 75% of your creditors (who vote and by value) must agree to it, and indeed they are only likely to do so, if you can show they will obtain a better return than if they were to make you bankrupt.
HOW DO I OBTAIN AN IVA?
An IVA is set up by an insolvency practitioner, who writes to your creditors with a proposal using information that you have provided. The proposal may not only just include payments from your income, but may also include you having to obtain a re-mortgage on your house or indeed obtain a cheaper car.
No two IVA’s are the same, as they are dependent on the individual and their assets. In order for the IVA to be implemented, 75% of your creditors (who vote and by value) must agree to it, and indeed they are only likely to do so, if you can show they will obtain a better return than if they were to make you bankrupt.
ADVANTAGES
- It is a legally binding agreement which your creditors have to abide by, whereby they are unable to take further action against you.
- It’s time limited so you only have to repay for the prescribed time
- Usually as part of the IVA there is some form of debt right off so you don’t need to repay the full amount
- If you have a significant number of creditors it means they are all handled through one agreement and there is usually less pressure on you as you no longer have to deal with them directly
- The IVA is tailored specifically to you and your situation
- You may be able to obtain a variation in the agreement if your situation changes in the future
- Stigma is less than bankruptcy
DisADVANTAGES
- An IVA will affect your credit rating, therefore you may struggle to obtain credit.
- If you work in accountancy, law or finance, some employers will not accept individuals with IVAs, however you should check your contract
- If you obtain a ‘windfall payment’ i.e. inherit money, you may have to pay this into your IVA (but this still applies if you are an undischarged bankrupt)
- As your income from a pension forms part of your income, you may have to pay part of this into your IVA (but again this can apply in bankruptcy)
- If you miss payments or are unable to continue to make payments, you may have no option but to go bankrupt or be made bankrupt.
WHAT ARE THE RESTRICTIONS DURING THE IVA?
Your credit rating may be affected for 6 years from the date of the agreement
You’ll have to keep to a budget agreed with your provider for the duration of your IVA
If you miss payments, the IVA may be extended or terminated
You must declare any additional assets you receive including increased income
You may be unable to take out new debts above £500 during the IVA
costs of An IVA
The cost of the IVA to you, is often more expensive than bankruptcy, as you have to pay the IP to propose the IVA to your creditors but it may be less to the creditors than a bankruptcy. Should the IVA be agreed, the IP will then usually take a percentage of the amount paid into the IVA each month. On average, IVA costs are between £4,000 – £5,000, however it can be dependent on the size of your debt and the level of contributions.
costs of An IVA
The cost of the IVA to you, is often more expensive than bankruptcy, as you have to pay the IP to propose the IVA to your creditors but it may be less to the creditors than a bankruptcy. Should the IVA be agreed, the IP will then usually take a percentage of the amount paid into the IVA each month. On average, IVA costs are between £4,000 – £5,000, however it can be dependent on the size of your debt and the level of contributions.