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What is an IVA?

IVAs, or Individual Voluntary Arrangements, are arrangements made with your creditors to repay your outstanding debts within a certain timeframe, such as five years. An IVA takes the form of a formal proposal for repayment that is presented to creditors via an Insolvency Practitioner. If the proposal is agreed, you enter into a contractual arrangement with your creditors to repay a certain amount over a set timeframe. A proposal is put to each of your creditors, and they then vote on whether to accept the IVA or turn it down. If creditors representing at least 75% of your debt vote to accept it, the other creditors must agree to the terms of the IVA by law.

Why do creditors agree to IVAs?

Creditors agree to IVAs because they often get more money back through the IVA than they would if you were declared bankrupt . Also, the payments made through an IVA might not be available to them if you were declared bankrupt – for example, they may come from a third party.

Advantages of IVAs

Often, some of your debt is ‘wiped out’ as part of the deal – this can sometimes be as much as 75% of your total debt. During the period covered by an IVA, interest payments are frozen. IVAs are a good way to avoid being declared bankrupt; you may also be able to avoid having to sell your home in order to pay off your debts. Sometimes, an IVA will exclude your property from the deal altogether, or you may be recommended to remortgage your home.

IVAs usually relate only to the claims of unsecured creditors, and do not affect the claims of secured creditors. (Unsecured debts include credit cards and personal loans, while secured debts include mortgages.) However, some IVAs do also cover the rights of secured creditors.

Flexibility and privacy

As their name suggests, each IVA is an individual arrangement between a debtor and their various creditors. Because of this, they are flexible and can be tailored to your individual circumstances and the assets and income you have available to pay your debts. Monthly repayments are calculated to be realistic and affordable, although you will be required to pay as much as you can within your budget.

Unlike bankruptcy, an IVA is a totally private arrangement between you and your creditors. No-one needs to know about your debt problems or that the IVA has been set up – including, if you wish, other family members. In contrast, information on bankruptcies is published in local newspapers and the London Gazette, making it completely public.

Can you get an IVA?

If you owe more than £15,000 to at least three creditors and have at least £200 a month available to pay off your debts, you may be able to get an IVA.

An IVA can be a great way to lay the foundations of a debt-free life. With an IVA, you make a firm commitment to pay off your debts, with the prospect of walking away debt-free at the end of the IVA. Once the five years (or similar period) are up, you will be completely free of debt and all the problems that go with it – stress, anxiety and strain on personal relationships.

To learn more about the benefits of IVAs, contact Debt Options, apply online or call us on 0800 634 0525 to discuss the options.