IVA – Individual Voluntary Arrangement
- 24 Dec 2021
An IVA allows you to reduce your monthly debt payments to an affordable amount. You pay for 5-6 years after which any remaining balances are written off.
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Thinking about starting an IVA? Give us a call (0800 044 3194) or complete the form below to speak to one of our experts
What is an IVA?
An IVA (Individual Voluntary Arrangement) basically allows you to settle your debt over 5-6 years. It is available for individuals living in the UK (except for Scotland).
Your debt payments are reduced to a single amount that you can afford. Any balances left unpaid at the end of the arrangement are written off. The percentage of debt written off varies depending on how much you are able to pay.
The amount you pay back is not fixed. Your payments can go up if your circumstances improve. Also any windfalls received during the Plan (compensation, inheritance etc) must be paid in.
Starting an IVA will mean your credit rating is negatively affected in the same way as going bankrupt. The record stays on your credit file for 6 years preventing you from getting credit during that time.
When should you use an IVA?
This type of solution can be a sensible option if you are unable to pay off your debt in reasonable time using a debt management plan. In addition you may have debt such as CCJs or tax arrears which cannot be included in an DMP.
You should consider an IVA if you own an asset which would be at risk if you go bankrupt. This would be the case if you are a home owner or have an expensive car you do not want to sell.
It can also be a useful solution if your job prevents you from going bankrupt. For example if you work in particular areas of financial services or you are a company director.
To start an IVA you need to be able to maintain payments of at least £100/mth and have total unsecured debts of £6000 or more.
How to start the Arrangement
Unlike a debt management plan or bankruptcy it is not possible to start an IVA yourself. You will need to use a professional personal called an Insolvency Practitioner to help you.
First a formal proposal has to be drawn up detailing all your financial circumstances and the amount you are able to pay into the Arrangement. Your creditors then have to formally agree to it at a Creditor Meeting.
Once your proposal is agreed it is legally binding on all the creditors you have included. You are then obliged maintain your agreed payments.
There is a formal review of your finances each year. If your disposable income has increased your IVA payments have to go up.
What does an IVA Cost?
A significant advantage of an IVA compared to bankruptcy is there is no up front fee to pay. You pay nothing until the Arrangement is in place and then just have to maintain your agreed monthly payment.
That said once the Arrangement is in place fees will be deducted from the money you pay in. These will include a nominee fee of around £1000 and then an annual supervisory fee 15% of the money paid in. The Insolvency Practitioner is also allowed to deduct certain costs.
Generally speaking you do not have to pay extra to cover the cost of your IVA. The fees are deducted from the normal payments you make. may have to pay the fees yourself if the amount you are able to pay into the arrangement increases
Considering an IVA? For a confidential no obligation chat with one of our experts give us a call (0800 044 3194) or complete the form below.