DebtOptions

What is an IVA?

An IVA, or Individual Voluntary Arrangement, is a legally binding arrangement between you and your creditors. Under an IVA, you agree to pay off a certain amount against your debts each month for a set period – usually five years. Once the period is over, you are free of debt. Your creditors must agree to your IVA before it can go ahead.

Who can get an IVA?

IVAs are available to individuals, sole traders and partners facing financial difficulties. They are likely to be most useful for people with unsecured debts that they cannot afford to pay.

Will I be able to get an IVA?

If you owe more than £15,000 to three creditors or more and have some disposable income available month available to pay off your debts, you may be able to get an IVA.

How much will I have to repay?

Your repayment is worked out based on your individual circumstances. It depends on the assets you have available, and how much money you have left over from your monthly income after living expenses.

What are the key benefits of IVAs?

Very briefly, the key benefits of IVAs for individuals are as follows:

• You commit to making one simple monthly payment, based on what you can afford after living expenses.
• You only have to deal with a Licensed Insolvency Practitioner, rather than dealing directly with your creditors
• Your debts are frozen, attracting no more interest
• Your financial problems will not be publicised Once the period of the IVA is up, you can start afresh free of debt

Sole traders and partners can use IVAs to secure the survival of their business, rather than losing it to bankruptcy, because they believe it will be profitable in the future and creditors will get more from the business continuing to trade than being wound up.

Is an IVA a legal agreement?

Yes. Unlike a Debt Management Plan, which is an informal arrangement, an IVA is a legal agreement between you and your creditors.

Is an IVA an alternative to bankruptcy?

Yes, an IVA is an alternative to bankruptcy and a way to avoid being declared bankrupt. However, some people propose IVAs after they have been declared bankrupt – if this is approved, they can apply for their bankruptcy to be annulled.

Do all my creditors have to agree to my IVA?

No. Your creditors will vote on whether to accept your proposed IVA or not. If creditors representing 75% or more of your debt agree, the rest must go along with the IVA.

Creditors are unlikely to agree to the IVA if the amount you propose to repay is too small. For example, if you suggest repaying less than 25% of what you owe them, they may feel that they could get more if you were declared bankrupt, and reject the IVA.

Will my debts still attract interest if I get an IVA?

No. If your IVA is approved, your debts will be frozen and will not attract any further interest. In other words, the amount you owe will not increase if your IVA is approved. IVAs are the only solution to debt problems with this feature.