Individual Voluntary Arrangement (IVA) - How Do They Work?

Quick Guide To The IVA Process

An IVA or Individual Voluntary Arrangement is effectively a contract between you and the creditors to pay back a certain proportion of the debt you owe them over a fixed term (typically five years). After this time any unaffordable unsecured debts will be written off.

individual voluntary arrangement For example, if you have debt levels of £12000+ you may benefit from this, as paying using a Debt Management Plan (or DMP) may take longer than with an IVA.

What are the benefits of an IVA?

  • Consolidate your debts
  • Reduce your monthly outgoings so they are affordable for you
  • Give you a fixed date when all your debt is cleared
  • Freeze your interest rates and fees
  • Stop calls from debt collectors and bailiffs
  • Stop creditors phone calls and letters

What are the drawbacks of an IVA?

  • You are tied into a fixed term of the individual voluntary arrangement
  • The insolvency register will have a record of your details
  • Any additional credit will not be possible
  • Not complying with an IVA may eventually result in bankruptcy
  • There may be an impact on your credit record

Main criteria for acceptance

Just as with other financial solutions, an IVA, does have specific criteria for acceptance, so it may be appropriate to outline them so that you will be able to make an informed choice at the right time.

If you have debt levels of at least £6000 and have a minimum of £70 per month disposable income to pay creditors with, then an individual voluntary arrangement may be an option worth considering for dealing with all of your debts, particularly if you have multiple creditors.

Getting the right iva advice

By speaking with an IVA adviser who can act on your behalf they will be able to negotiate with your creditors to reduce your debt. In many cases, the IVA advisor's initial work is done with a fully licensed insolvency practitioner who will supervise the final arrangements, to make sure that it is legally sound and compliant with current regulations.

Insolvency Practitioners - What Do They Do?

A licensed Insolvency Practitioner (as opposed to an IVA advisor) can help you sort out your non-priority debt by putting together a plan. This plan is called an iva proposal, and based on the information given to the advisor.

The individual voluntary arrangement proposal, is an agreement to repay your creditors (people you owe money), either in full or more likely a certain percentage of the total debt owed, over a certain time period (term), typically 5-7 years.

If required, the IVA advisor may ask the court for an interim order, which prevents creditors from taking action during the preparation of your proposal. This can be helpful, if for example, a creditor threatens to take any action against you, like if they threaten to make you bankrupt.

The IVA advisor will prepare a report for the court, including their opinion on whether the proposal will work. They will call a creditors’ meeting where your creditors will vote on whether to accept the proposal.

If enough creditors vote in favour, the proposal is accepted.

How Can You Start The IVA Process

There are 4 basic steps in the IVA approval process:

1. Your first contact with us

You can contact us. We will go through all your finances in order to assess your eligibility for a DMP or Debt Management Plan. This is for two main reasons; 1. an IVA may take at least six weeks for processing and short term things will be easier for you if you get you started with a DMP; 2. there is no guarantee that most of your creditors will accept an IVA proposal. It makes sense for you to have a back up strategy, in case your creditors do not agree to an IVA.

2. Making your IVA proposal

On initial contact, following the DMP assessment, your basic eligibility for an IVA will be assessed and, if required, we'll pass you to our IVA team for a full assessment.

If an individual voluntary arrangement is appropriate for your personal circumstances, we'll send you an application form for you to complete and return and start the initial drafting of your IVA. During this time, we'll always keep in close contact with both you and your creditors to ensure all the information is correct.

3. Meeting of creditors (MOC)

Once your IVA proposal has been drafted, we'll send it to your creditors for their consideration. We'll then arrange an individual voluntary arrangement proposal meeting 'by proxy' so your creditors can each cast their vote by post on whether they agree to the proposal. You do not usually have to attend the meeting, but you may do if you wish to.

4. Your IVA approval

For your IVA to progress and be approved, at least 75% of your creditors need to be in agreement with it.

As in over 75% of cases, it's very likely your IVA proposal will be accepted, then your case will be passed on to your dedicated case handler, who will looked after your IVA for you. If you have any problems or need to ask questions just contact us.

For more help about getting debt free with an individual voluntary arrangement, just contact us.