IVA is an abbreviation for Individual Voluntary Arrangement.
An IVA, by definition, is a legally binding agreement set up between you and your creditors for you to repay an amount you can afford over a fixed period of time; usually around five years. It allows any unsecured debts to be written off at the end of the IVA.
For an IVA to be approved, creditors representing at least 75% in value of the creditors who vote must agree to it. Once they have, it’s legally binding and they can’t pursue you, or take any further court action, as long as you keep to the terms of the agreement.
If you enter into an IVA then you will have an insolvency practitioner who will act as your nominee and help you put together a proposal for your creditors. Part of this will process will involve negotiating with lenders on your behalf to agree an affordable amount to repay.
Individual voluntary arrangements (IVAs) were launched in 1986 by the government, under the Insolvency Act 1986. The idea was originally that people struggling with debts so they could protect themselves and repay what they could afford over a fixed period of time.
These government-created IVAs then became increasingly common among people with high levels of consumer debt, who wanted to protect their assets by avoiding bankruptcy. Today, they are relatively common, and one that often allows your creditors a better chance of repayment than bankruptcy.
Bankruptcy rates are now at the lowest level in 25 years, according to the Insolvency Service, and that’s partly down to the increasing number of struggling debtors turning to other schemes, like IVAs.
In fact, figures from the Insolvency Service show that 99,196 people in England and Wales were made insolvent in 2017 and of those, 59,221 turned to an IVA as the best solution for their unsecured debts.
An individual voluntary arrangement is a type of insolvency and a legally binding arrangement between you and your creditors. It may be a suitable solution if you can afford to pay something to your debts, but not the full amount your creditors want.
No, you need to do this through a professional Insolvency Practitioner (IP) who will be able to accurately assess your financial situation and also deal with your creditors on your behalf and negotiate the amount of money you will have to pay every month. They will also supervise the IVA for the lifetime of the agreement, collecting a payment from you every month and disbursing payments to your Creditors.
IVAs are a type of insolvency and will show on your credit file for six years from the date it begins.
The kind of debts that you can include in an IVA are generally unsecured debts such as:
Mortgage debt is unlikely to be included – it is classed as secured debt as your home is held as a security against the debt you owe to your lender. Your IVA will take account of mortgage payments and other essential outgoings such as rent payments, factoring in how much you need to pay each month to safeguard your home.
In order to qualify for an IVA, you generally need have at least £5,000 in unsecured debt owed to two or more creditors. These figures are not legal requirements (there are none) but are general rules of thumb followed by the industry. You also need to be a resident in England, Wales or Northern Ireland. There is an equivalent scheme for those who live in Scotland called a Protected Trust Deed.
If all of the above applies to you and you have enough of a regular income to pay some but not all of the debt that you owe then you should consider an IVA.
At the end of the IVA, your remaining debt will be written off and you will be able to walk away debt free.
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