Individual Voluntary Arrangement
An IVA (Individual Voluntary Arrangement) is an agreement whereby you pay your creditors a set amount each month that you can afford, the rest of the debt is written off. It's most appropriate for those who have debts of more than £8,000 and cannot afford to meet repayments, who see missed payment charges incurred, interest increasing and their debt spiralling. However, the advisor will be able to shed more light on this and discuss whether it is the right option for you. We can tell you, without obligation, how best to get on a stable financial footing. Figures currently show that people in the UK have an average debt of £27,871.13 and no matter how much you are struggling, an IVA will help with your unsecured creditor payments you are struggling with.
What is an IVA?
An IVA can help you to resolve your unsecured debt without having to declare bankruptcy. All you need to have is a regular household income and live in England, Wales or Northern Ireland. An IVA (Individual Voluntary Arrangement) is a formal agreement between you and your creditors, the people to whom you owe money, to pay all or part of the debts you have with them. These arrangements are set up professionally by an authorised Insolvency Practitioner (IP) and as such there are professional fees that will have to be paid to enter into an IVA. An IVA will typically last for a five year period during which you will pay a percentage of your debt back. With an IVA in certain cases, you can have up to 75% of your debt written off.
All your unsecured debts will be consolidated into one, affordable monthly payment which can start from as low as £70.00 a month, dependant on your circumstances. This allows you to organise and take control of your finances by writing off the unaffordable debt and freezing interest. This has been a popular alternative to bankruptcy since the mid-1980s. The typical duration of an IVA is five years. In this time, you can start to make ends meat again and manage your money, knowing you are making a single affordable payment.
In summary:
- An alternative to bankruptcy.
- Guarantees Interest and charges froze.
- Stops creditors taking any further action.
How does an IVA work?
In just a few steps from making the first call, you could be on the road to controlling your unsecured debt. Typically you should expect the process of setting up an IVA to take around six weeks. However, the main thing to remember about the process of getting an IVA is that the Insolvency Practitioners are there for you every step of the way.
Step 1
From the initial telephone call you will discuss how an IVA works, whether its right for you based on the information you have provided. If an IVA is right for you then paperwork will be sent out for you to read through carefully, complete the creditor commitment form with the details of the creditors of whom you owe money to, sign and date the letter of authority and send back straight away in the pre paid envelope provided along with the relative documents required which will be confirmed on the phone for you and also in the paperwork.
Step 2
On receipt of the paperwork where you will be called to confirm this, a brief questionnaire will be completed then your case will be referred to the Insolvency Practitioner, letters are then sent to your creditors to confirm that the company acting on your behalf will be proposing an IVA. Proposals are then drawn up to be sent to your creditors to set up the appropriate meetings for them to approve the IVA, but will be sent to you first to review, then sign and date and return back to the Insolvency Practitioners as soon as possible.
Step 3
The majority of your creditors will need to vote in favour of the IVA in order for it to go ahead. This means that creditors holding 75% of the total debt value must agree to your IVA. Once your IVA has been accepted you will be informed straight away. Your IVA then commences and your first IVA payment would be due within 6 weeks.
Advantages summary
- Creditors who vote against your proposal are still bound by it.
- Creditors whose lending is unsecured can’t take any further action.
- Interest is usually frozen as long as you keep up your payments.
- Your insolvency practitioner will help you prepare your proposal, including agreeing the level of your household and personal spending based on guidelines acceptable to creditors.
- Many insolvency practitioners will allow you to pay their fees for preparing your proposal monthly, as part of the IVA.
- You make only a single payment each month or quarter. Your insolvency practitioner is responsible for administering and distributing your payments.
- The terms of an IVA will usually enable you or your spouse or partner or a relative to make arrangements to buy your share of the net worth of your home or to make extra payments, rather than the home having to be sold. This may be done through a remortgage or a loan. (Net worth means its value after any debts secured on it have been paid.)
- On completion of the IVA, the balance of what you owe your creditors is written off.
- You may be able to continue running any business you have.
Disadvantages summary
- Your IVA is entered on a public register.
- The insolvency practitioner may require payment in advance for preparing your proposal and getting your creditors’ agreement.
- If there is some equity (value) in your home after taking account of the mortgage(s) on it, you will probably have to pay for your share, usually in the fifth year of your IVA, by remortgaging the property. If you can’t get a remortgage, you may have to continue making monthly or quarterly payments from your income, for up to another year.
- If your circumstances change, and your practitioner can’t get creditors to accept amended terms, the IVA is likely to fail. You will then still owe your creditors the full amount of what you owed them at the start, less whatever has been paid to them under your IVA.
- If your IVA fails, you may be made bankrupt.
What are the IVA fees?
We do not charge any setup fees for an IVA. Our associate partner Insolvency Practitioner’s will normally take a charge for their service out of your monthly repayments. This is known as the Nominee’s fee and a Supervisory Fee, along with other associated costs, which are born as a cost of your individual voluntary arrangement.
What do IVA fees cover?
IVA fees will cover
- Agreeing a monthly budget with you.
- Drafting and preparing your agreement.
- Holding a creditors meeting and proposing your case.
- Dedicated account managers on hand to help with any questions/queries you may have throughout your IVA.
- Conduct annual reviews to ensure your circumstances haven't changed, and distribute monies to your creditors.
- The nominee's fee for setting up and agreeing the IVA with you and your creditors is normally a fixed fee. This will be taken before any payment is made to creditors. It is different to supervisor's fees. These are normally on a percentage basis and spread over the duration of your IVA.
- You will never be faced with any unexpected fees as you will always be told what fees are involved and how they are calculated before you commit to an IVA.
- Creditor Voting Agencies apply the same fee basis for all IVA providers.
IVA Example
Before entering an IVA:
| Outgoing | Total |
|---|---|
| Personal loan A | £10,000 |
| Personal loan B | £5,000 |
| Credit cards | £8,000 |
| Total owed | £23,000 |
After entering an IVA:
| Outgoing | Total |
|---|---|
| Monthly Repayments | £180 |
| Total Debt Repayment | £10,800 |
| Total Debt Written off | £12,200 |