Category Archives: IVA

What happens in an IVA?

An IVA (Individual Voluntary Arrangement) can be a very good way of tackling unmanageable unsecured debts. But, as with any debt solution, there is a lot you’ll need to know before you can really decide whether it’s right for you.

You’ll need to talk to an expert – but in the meantime, here is a quick step-by-step guide to what you can expect from an IVA.

Before your IVA begins: the IVA proposal

Before your IVA can start, you and your Insolvency Practitioner (IP) will need to put together an IVA proposal that will detail the proposed terms of your IVA.

Your unsecured lenders will then be invited to vote for or against this proposal. For your IVA to become approved, it must receive approval from 75% of voting lenders (by debt value).

If it’s approved by enough of them, your IVA can begin.

During your IVA

Once your IVA has started, you will be legally protected against any further action from your lenders regarding your unsecured debts – as long as you uphold your side of the agreement, they won’t be able to demand payments on top of what they receive from your IVA payments, and they won’t be able to petition for your bankruptcy.

You’ll start making your agreed monthly payments (based on what you can afford alongside your other essential costs), from which the agreed amounts will be distributed between your lenders by your IP. In most cases, this lasts for five years, although IVAs can be longer or shorter than this depending on what your lenders are willing to agree – and how well you’re able to stick to the terms of the IVA.

Providing you keep up with your IVA, at the end of the agreement any remaining unsecured debt will be written off.

Other important things to remember

If you’re a homeowner, it’s possible that you will be expected to release some of the equity in your home in the 54th month (half way through the final year).

Also keep in mind that an IVA will have a significant impact on your credit rating, and it will also leave you with little money for anything other than your essential expenses until it has finished.

Facts about IVAs

An IVA (Individual Voluntary Arrangement) can be a big help for people struggling with unmanageable unsecured debts. It’s a formal agreement with your unsecured lenders in which you’ll repay an agreed percentage of your debt, and your lenders will write off the rest once you’ve done that.

As with any debt solution, there are a number of things you’ll need to consider before you go ahead. Here are a few facts about IVAs to help get you started.

It’ll write off the debt you can’t afford

The idea of an IVA is that it enables you to repay as much of your unsecured debt as you can afford, and writes off the rest.

Your IVA will be set out over a fixed number of years – usually five – in which time you’ll be expected to pay as much as you can towards your debts each month. What’s left of your take-home pay after your other essential costs have been covered will go towards your debts.

On successful completion of the IVA, your remaining debt will be written off and you’ll be legally debt-free (in terms of unsecured debt – your IVA won’t be able to write off any mortgage debt you have, for example).

It protects you against action from your lenders

Once your IVA is agreed, it’s a legally binding agreement. Your lenders will no longer be able to pursue you for the debts, unless you fail to keep up with your IVA payments.

However, this works both ways – you are required to make your payments each month, and if you don’t the consequences could be serious. You could end up being made bankrupt.

Your home won’t be at risk

An IVA is extremely unlikely to end up forcing the sale of your home. This can make it a good option for homeowners who are really struggling with their debts and don’t want to enter bankruptcy.

However, if you are a homeowner, you may still be required to release some of the equity in your home in the final year of your IVA.

It’s only available to people who need it

Because an IVA writes off the debt you can’t afford and should leave you debt free after five years, some people might see it as an ‘easy way out’ at first glance – but this isn’t the case.

You’ll only be eligible for an IVA if you can demonstrate that you really can’t afford to repay your debts in full. You must also be able to commit to regular monthly payments, and you’ll be expected to pay as much as you can afford.

It’ll affect your credit rating

Like any form of insolvency, an IVA will harm your credit rating. This will make borrowing money more difficult while it’s on your credit report.

So you should only enter an IVA if you are completely sure it’s the right option for your circumstances. A debt adviser can talk you through all your options and help you find a debt solution that’s right for you.

Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement or (IVA) is a debt solution made available in the United Kingdom – it is a alternative for people not wanting to go bankrupt. IVAs are governed by the Insolvency Act of 1986 and are made possible through the help of an Insolvency Practitioner.

Originally introduced in Part VIII of the Insolvency Act, IVAs have become a popular form of repayment for residents of the UK with a serious debt problem.

Most of the time, an IVA will only be used for paying off the unsecured debts but this is not always the case. Sometimes they can be used to cover secured debts as well. It depends on the agreement.

An IVA is a formal contractual agreement but it is quite flexible in that sense too. The amount that you pay each month into the IVA will greatly depend on how much money you can afford each month.