IVA (Individual Voluntary Arrangement)
How much debt can I have?
There is no minimum amount or maximum amount to qualify for an IVA. However, it is normally not the best option to deal with your debts if they are below £8,000.
What type of debt will be included?
Almost all debt can be included, some exceptions are student loans, court fines, or maintenance arrears, child support arrears, debts built up through fraud, debts arising from a personal injury claim or crisis loans.
When will I be free from my debts?
There is no maximum or minimum time limit, however a monthly contribution based IVA usually lasts five years.
How does this option work?
An IVA Is a formal agreement between you and your creditor, and seen as an alternative to bankruptcy. In an IVA you make an offer to your creditors to repay a portion of your debt over a set period, which is generally five years for monthly contribution based IVA’s. You can also propose a shorter IVA based on a lump sum offer. If your IVA is approved by your creditors and you successfully pay all the funds you proposed, then at the end of the IVA any balances left on your debts are written off.
You will need an Insolvency Practioner to set up an IVA, who will charge fees for preparing and supervising your IVA. These funds normally come from the total offer you put forward to your creditors.
The IVA has to be voted on by your creditors and agreed by 75% by value value of those creditors who vote.
An IVA is generally a good option when you own your home but not enough equity to discharge all your debts and your home would be at risk in bankruptcy, and you are able to propose a partial offer to your creditors.
What are the advantages?
- It allows you to clear your debt within a fixed timescale
- Majority of those who enter an IVA repay less than what they owe
- You can usually retain your house and other assets dependent on your individual circumstances
- If you have a lump sum it is easier to offer this to all your creditors as full and final settlement in an IVA than informally approaching each individual creditor
- It removes all stress and anxiety with dealing with your debts and creditors
- There are generally no upfront fees or costs, these are taken from the funds you offer to your creditors
- You can continue to trade when you enter an IVA subject to certain credit restrictions
- You can remain as a Limited Company Director and enter into an IVA
What are the disadvantages?
- You will have to change your bank account if you have an overdraft debt or any other debt owed to your bank that is being included in the IVA
- If you do not keep to the repayment offer you made in your IVA then your IVA could fail
- Your creditors must agree to your IVA proposal
- If your circumstances change and you cannot maintain your IVA repayments, your IVA could fail and you would be back in the position you started in
- An IVA will affect your abilitiy to get credit for six years
- There are some type of debts that will not be written off
- If you are self-employed, you will have credit restrictions placed on you that may make it difficult to continue to trade
- If you own a property, you may have to attempt to re-mortgage at the end of the IVA or agree to extend the term of your IVA to make a contribution towards your equity
- If you pay an upfront fee to an IP and your IVA is not approved, you will lose the fee
- Details of your IVA is held on the Individual Insolvency Register