Individual Voluntary Arrangement

What is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) is a legally binding contract that enables you to repay a portion of your debts over a set duration.

You will make one or more payments to an insolvency practitioner (IP), who oversees the allocation of these payments to your creditors. An IVA generally spans five to six years.

After this time frame, if you have completed the agreed payments, any outstanding debts will be erased.

Most kinds of debt can be incorporated into an IVA. However, specific debts like mortgage or rent arrears are typically excluded.

Is an IVA right for you?

An IVA might be a viable option if:

• You have disposable income every month.
• You risk losing your employment or business if you file for bankruptcy.
• You can manage a lump sum payment.

If your only income source is state benefits, an IVA may not be suitable for you.

Before initiating an IVA, look at all the options available. Make sure the payments stated in the IVA proposal are manageable and be aware of any fees involved.

How do I set up an IVA?

First, you should appoint an Insolvency Practitioner (IP), who is most often either an accountant or a solicitor. Always verify the fees that the IP charges before agreeing to any contracts.

Once the IP creates the IVA proposal, they can request an interim order from the County Court. This order prevents creditors from starting bankruptcy procedures or taking additional enforcement actions without the court’s consent.

The IP will collaborate with you to establish how much you can realistically pay each month. It’s crucial to assess your finances thoroughly; if you do not meet the payment requirements, your IVA may be terminated, and you could encounter further actions, such as bankruptcy.

After the IP submits your IVA proposal to your creditors, they will vote on whether to accept it:

If the IVA is approved, you must follow the established payment plan.

If the IVA proposal is declined, you will need to negotiate directly with your creditors and may have to look for different solutions.

An IVA will be noted on your credit file for no less than six years, which could affect your ability to secure credit in the future.

To set up an IVA, you will need a secure bank account - an account with a financial institution to which you do not owe any debt.