What is an IVA?
An individual voluntary arrangement (IVA) is an agreement that is made with your creditors to pay off your debts over a set period of time and is one option that may help you to pay off your debts. An IVA is a formal, legal debt solution, this means it is approved by the court and your creditors have to stick to it.
An IVA is a form of insolvency and must be set up by a qualified person called an insolvency practitioner, they will deal with your creditors throughout the life of your IVA. The insolvency practitioner will charge a fee for the IVA. If you an IVA is right for you, your intended insolvency practitioner will be clear how much your charges are before you enter into the agreement.
How do the repayments work?
If you decide an IVA is right for you, you will work out a repayment plan with the insolvency practitioner.
The repayment plan is put to the creditors and if they agree you will pay back a set amount each month, typically for five years.
Your monthly repayments will be paid directly to the insolvency practitioner. They will then distribute the money to your creditors. Some of your monthly payment may be kept by the insolvency practitioner to pay their fees.
Can any of my debt be written off?
If the payments into the IVA are not enough to pay your debts in full, the rest will be written off at the end of the IVA. The insolvency practitioner should advise you about this.
How do I qualify for an IVA?
You must have a minimum of £5,000 worth of eligible debt, these are debts that are eligible to be included in an IVA (It can occasionally be lower depending on circumstances). You must owe money to at least two creditors and have an available monthly disposable income of at least £70.
A number of debts can be included on an IVA with the exceptions of student loans, court fines, child maintenance arrears and secured debts, although other exclusions may apply.
Each organisation may have slightly different qualifying thresholds (such as higher or lower requirements on disposable income). IVAs are not available in Scotland – see our Protected Trust Deeds section, which is suitable for Scottish residents.
What happens at the end of an IVA?
Most IVAs last for a set time, typically 5 years (Or it can be six years if you are a homeowner with equity)
When your IVA has finished:
- you’ll no longer have to pay your creditors for the debts in the IVA
- your insolvency practitioner should give you a completion certificate
- the record of your IVA will also be taken off the insolvency register
Individual Voluntary Arrangement FAQ
Will the interest and charges be frozen on my debts?
During the IVA the creditors are required to agree to freeze all interest and charges on your debts. If you adhere to the terms of the agreement, whatever is left owing at the end of the IVA will be written off by your creditors. This means that you only pay back what you can afford during the term of the arrangement.
What if I can’t make monthly payments into an IVA?
If you do not have enough income to make monthly payments, you can still do an IVA providing you can make a one-off lump sum payment. There are a number of ways this money can be raised. For example, a friend, relative or third party may give you a gift in order to clear your debts, you could release the equity in your property or surrender a life policy. The creditors are likely to accept writing off the majority of your debt if it is clear to them this is the only solution. In a lump sum IVA the whole process can take as little as 3 months compared with 5 years in a monthly payment IVA.
What impact will an IVA have on my credit file?
Credit reference agencies will record your IVA at the start of the arrangement. It will stay on your credit record for a minimum of 6 years.
What happens to my home in an IVA?
If there is equity available in the property (the money that would be left over if the property was sold after paying any outstanding mortgage and secured debts held against the property) the creditors would expect you to try and release the equity to use some of this to pay them.
Will I be contacted by my creditors?
Your Insolvency Practitioner will contact your creditors to notify them that they are working on your behalf. This should contribute reduce creditor contact, however, you may still receive some contact in the early stages of the IVA process. Do not ignore creditor calls; be polite and notify them of your actions in dealing with the debt.
What is the Protocol?
The Protocol is an agreement which provides a structure, approved by the major banks and credit organisations, for dealing with consumer IVAs. If Insolvency Practitioners follow the requirements of the protocol in preparing the proposal, creditors who have accepted the content of the protocol are expected to adhere to the terms.
What is the Proposal?
It is the formal document which is the basis of your agreement with creditors.
What is needed to set up a proposal?
The process entails a number of steps:
You will have an assessment with an advisor who will help you to understand if an IVA is right for you.
If the IVA is your best option you will be asked to provide documentary evidence concerning your debts, monthly income and expenditure, any assets etc. You have to provide a clear summary of your financial situation for the creditors.
When you have provided all of the information required, your Insolvency Practitioner will draft your IVA proposal (your offer to the creditors). This is a legal document and includes your background information and the details of your offer, in addition to further information about the administration of the arrangement.
You then approve and sign the IVA Proposal documents. The Insolvency Practitioner will consider them to ensure that your offer is fair to both you and your creditors. The Insolvency Practitioner will also prepare a report which is sent to your creditors with your proposal.
At the same time, the Insolvency Practitioner will arrange a meeting date for your creditors to vote on your proposal. You will not usually be expected to attend the meeting although you must be available.
What do I have to agree to when entering into an IVA?
Your proposal is specific to your circumstances but your creditors will expect you to pay the maximum you can afford on a monthly basis, for the duration of the IVA. If your income increases you may be expected to increase your payments and if you receive a lump sum you should pay that into the arrangement too. If you have other assets they may have to be used for the arrangement as well; your adviser will discuss with you how your assets can be included or excluded from the arrangement depending on your circumstances.
What if I change my mind?
An IVA is a serious commitment to your creditors. If you undertake the full term your creditors will write off your debt. If during the course of your arrangement, you change your mind and/or do not keep to your side of the agreement it will break down and you will revert to your original position of dealing with your creditors on your own.
How long does it take creditors to agree to my proposal?
If you act promptly an IVA can be agreed and in place in less than 6 weeks. For you this will mean a suspension of all legal action, no further worrying phone calls or being chased by debt collection agencies.
What if one of my creditors does not agree to the IVA?Not all creditors have to agree. As long as 75% (by value) of the creditors who vote agree, the rest will also be bound by the agreement. However, if a creditor has not been told about your arrangement they have the right to object to the approval. Therefore, it is important that you tell us about all of your creditors.
What is an Insolvency Practitioner?
An Insolvency Practitioner is a licensed specialist. The law requires an Insolvency Practitioner to be involved in the IVA process. The work of the Insolvency Practitioner may be delegated to experienced members of staff.
What does an Insolvency Practitioner do?
Initial advisor: Helping you to consider your options to find the best solution to your financial difficulties. The Insolvency Practitioner will also help you to prepare the IVA proposal if this is the right option for you.
Nominee: The law requires an Insolvency Practitioner to assess and report to creditors on your proposal. At this stage, the Insolvency Practitioner must act independently to consider whether the proposal is fair to you and your creditors.
Supervisor: When the arrangement has been agreed between you and your creditors, the Insolvency Practitioner’s job is to oversee the arrangement until it is completed. The duties of the Supervisor will be specified in your arrangement.
How much will I have to pay in fees?
You should not pay any fees unless your IVA is approved by your creditors.
Your proposal will specify the amount to be paid to the Insolvency Practitioner whilst appointed as Nominee and Supervisor of your arrangement. These fees have to be approved by your creditors because they are taken from the amount paid into the arrangement and hence reduce the amount that your creditors will get. The creditors understand and accept this. For you, this means that once your arrangement is approved, you only pay the regular payments you have agreed to.
The fees that creditors usually require are £1000 for the nominee’s fee and 15% of the total amount paid into the arrangement for the supervisor’s fee. These fees will vary between IVA providers.Blackberry Finance do not take a fee from you but do take a payment from the Insolvency Practitioner we refer you to. This supports our funding and enables Blackberry Finance to continue to provide advice to those in need.
Can I get free advice?
Yes, you can seek free advice but if an IVA is right for you, an IVA cannot be provided without a fee. For further information please visit MoneyHelper. MoneyHelper is a free and impartial service set up by the government to help people to manage their money.