What is an IVA?
When an agreement is made with your creditors to pay off your debts over a set period of time, this is known as an individual voluntary arrangement (IVA).
To pay off your debts this is a solution to be considered. As an IVA is approved by the court which your creditors will have to adhere to as it is a formal & legal debt solution.
An IVA has to be arranged by a qualified individual known as an insolvency practitioner. During the period of your IVA the insolvency practitioner will handle your creditors. If an IVA is suitable for you, your insolvency practitioner will clarify the fee before setting up the IVA.
How do the repayments work?
If you choose to set up an IVA, a repayment plan will be discussed with your insolvency practitioner. A financial consultant will assess your Income and expenditure to ensure your monthly contributions are affordable for you. Restrictions on your expenditure will apply in an IVA. If your repayment plan is approved by your creditors, normally you will pay back monthly for five years however this can be extended up to 6 years if you have equity in your home.
The monthly repayments will be paid directly to your insolvency practitioner who will then distribute the money to your creditors. You may also include the practitioners fees within these payments
Can any of my debt be written off?
If the payments into the IVA are not enough to pay your debts in full, the rest will be written off at the end of the IVA. The insolvency practitioner should advise you about this.
How do I qualify for an IVA?
You need a minimum of £5,500 worth of eligible debt, that can be included in an IVA ( can sometimes be lower based on the case). Money must be owed to a minimum of two creditors and access to monthly disposable income of at least £75.
Many types of debts can be included on an IVA however there are a few exceptions such as; court fines, student loans, child maintenance arrears and secured debts (other exclusions may apply).
The thresholds of what may be accepted (such as higher or lower requirements on disposable income) may vary with each company
Scottish residents are to refer to our Protected Trust Deeds section as IVAs are not available in Scotland
Risk of failing your IVA could lead to bankruptcy. Should an IVA fail through your own negligence for example failing to make your monthly contributions means that you could potentially lead to bankruptcy.
What happens at the end of an IVA?
Most IVAs last for a set time, typically 5 years (Or it can be six if you are a homeowner with equity) and will be placed on a public register.
When your IVA has finished:
- The Insolvency Register will delete the record of your IVA
- You will receive an completion certificate from your Insolvency Practitioner
- Your Creditors will not have to be paid for the debts in the IVA
All solutions affect your credit rating in some way. Your credit rating may be affected for up to 6 years and you may have difficulty obtaining credit in the future, depending on which programme you enrol into. Nevertheless, if you are having financial problems it is very likely that your credit rating has already been negatively affected, particularly if you have missed a payment. The good news is that no matter what your credit rating is, you can always rebuild it over time and this process can begin as soon as your plan ends, as long as you remain debt free once the plan has ended.