Individual Voluntary Arrangements (IVAs)
If you have a substantial amount of unsecured debt, usually around £15,000 or more, an Individual Voluntary Arrangement (IVA) could be your best solution. It acts as a legally binding agreement between you and your creditors, effectively freezing interest charges and setting an affordable monthly payment amount over an agreed fixed period, usually 5 years.
The benefits of an IVA are:
- Write off the unsecured debt you can't afford to repay
- One affordable monthly payment - usually for five years
- Protects you from further action by your creditors
- Creditors are legally bound by the terms of the agreement
- Real alternative to declaring yourself bankrupt
- No public notices: an IVA is between you and your creditors
- Best of all, you'll know exactly where you stand, exactly what you have to pay each month - and for how long.
We are here to help whatever your circumstances: divorce, illness, losing a job or a business, starting a family or simply over-committing ourselves can all make our debts get out of control.
If you owe significant amounts of money (in most cases, this means a total of £15,000 or more) to multiple creditors and you`re unable to keep up with your monthly payments, there`s a chance an IVA (Individual Voluntary Arrangement) could help you reduce your monthly payments and clear your debts over an agreed period of time (this will be 60 months in most cases).
IVA - The Basics
An IVA is an agreement between a borrower and their unsecured creditors. Basically:
The borrower agrees:
- To make fixed monthly payments - as much as they can afford once they've taken into account their essential living expenses, from their rent/mortgage to their food, utility and petrol bills
- To make those payments all the way through the IVA, and
- To release equity from their property in the final year of the IVA (if they`re a homeowner), in order to maximise the amount of money their creditors receive.
The creditors agree:
- To accept their share of those payments
- To refrain from pursuing any legal action against the borrower, and
- To write off any outstanding debt once the IVA has been successfully concluded.
IVA - The Process
Step 1: discussing your options with a debt adviser
A professional debt adviser will help you explore your options. They'll discuss your finances with you and explain the various debt solutions which could be appropriate for someone in your situation.
If it looks like an IVA is the best way for you to address your debts, they'll work with you to draw up an IVA proposal, which details how much you`d be able to pay if the IVA went ahead.
Step 2: The Creditors Meeting
Your creditors will be invited to look at your IVA proposal and decide whether or not they think your IVA should go ahead. 75% (by debt value*) of voting creditors must be in favour of the proposal for the IVA to go ahead. They may wish to request some changes first.
Step 3: The IVA
Your IVA will begin. you'll make your monthly payments to your Insolvency Practitioner (IP), who will subsequently make payments to your creditors as agreed. The interest on the debts will be frozen.
Everyone involved in the IVA is bound by the terms of the agreement. If you break them, your creditors may try to pursue legal action against you, such as making you bankrupt - but as long as you stick to the rules, they`re not allowed to do so. So an IVA is not appropriate for people who can`t commit to making regular payments.
Step 4: Equity Release
If you`re a homeowner, you'll probably have to release equity in your property in the 54th month (6 months before the end of the IVA).
Step 5: End of the IVA
Providing all has gone according to plan, your IVA will come to a successful conclusion after your 60th payment (at the end of the 5th year). Any outstanding unsecured debt will be written off and you will be legally debt-free.
One year after the IVA finishes (6 years after it started, in other words), the IVA will be removed from your credit rating.