What is an Individual Voluntary Arrangement (IVA)?
What is an IVA?
An individual voluntary arrangement is an agreement between you and your creditors to help you pay off your outstanding debts at an affordable rate over a period of time. It is a formal, legal debt solution.
An individual voluntary agreement is a form of insolvency but differs from a declaration of bankruptcy. If your IVA is approved by the court, your creditors have to work to the agreement.
How do IVAs work?
An IVA is a legally binding agreement between you and your creditors. If you have an IVA and stick to the agreement you will get protection that effectively stops your creditors taking further action against you and it is likely that some of your debt will be written off.
How do repayments work?
If you decide to get an IVA it is likely you will work out a payment plan with an insolvency practitioner. The repayment plan is put to the creditors and if they agree you will pay back a set amount each much; this is typically for a period of around five years.
Your monthly payments will be distributed to your creditors by your insolvency practitioner and it is likely that some of these payments will be kept by the insolvency practitioner to pay for their fees.
Can my debt be written off?
If the payments you are making to the IVA are not enough to pay off your outstanding debt in full, the remaining debt will be written off. Your insolvency practitioner should advise you about this.
What happens at the end of an IVA?
Most IVAs last for around five or six years and when you have finished paying these:
- You will no longer have to pay your creditors for the debts in the IVA
- You should receive a completion certificate from your practitioner around 4-6 weeks after your last payment.
The advantages of an IVA
- You should be debt free within 5 years.
- Telephone calls and payment demands stop.
- You agree a single monthly payment that you can afford.
- Protection on your home – you will not be forced to sell during the IVA process.
- An IVA is a private agreement between you and the creditors.
The disadvantages of an IVA
- Your credit rating will be affected and you will be unable to borrow for the duration of the IVA.
- Professional Status – some jobs do not allow the employee to become bankrupt or be in an IVA.
- An IVA lasts longer than bankruptcy.
- You must include all creditors and you cannot make separate arrangements with each one.
- You must make the payments on a regimented regime for 5 years to ensure you pay off your debt and you cannot afford to miss payments.