What Is An IVA?
An Individual Voluntary Arrangement (IVA) is a formal legally-binding debt solution – an agreed arrangement between you and your creditors (the people you owe money to). An IVA essentially means that you are reaching a compromise with creditors to avoid the consequences of bankruptcy. It allows someone who is in financial difficulty to make a formal proposal to settle his/her debts within a reasonable and fixed period of time. This period is normally no longer than 5 years. The repayment proposal arrangement involves making reduced payments toward your total debt in order to pay an agreed percentage of it. The repayment proposal is based on what you can afford to pay and, after you have paid for the time agreed, your debt will be settled in full. Creditors prefer debtors to take out an IVA as it means the debtor can pay a larger contribution towards the debt than could otherwise be expected were the debtor to be made bankrupt.

Once agreed, an IVA also prevents creditors from adding any further interest to your accounts or taking any further action such as County Court Judgements, thereby adding additional protection to you.

An IVA can be seen as a win-win solution for both debtor (you) and creditor (those you owe money to). Preferable to bankruptcy for creditors who try to avoid bankruptcy petitions due to the high fees. Unless significant assets are likely to be realised within the bankruptcy, there is often little left for the creditors. They’d rather get some of their money back than none. While many people in debt would rather secure their home and/or business and pay off more of their debt (but a far reduced amount) than file for bankruptcy and have to cease trading/possibly lose their home

As a formal agreement, an Individual Voluntary Arrangement (IVA) must be set up by a licensed professional. A licensed Insolvency Practitioner (IP) will set up the IVA and present it to creditors at a creditors meeting. Once the arrangement is accepted the Insolvency Practitioner will then support and supervise the debtor to ensure the IVAs terms and conditions are met.

Unlike many companies,
Debt Help UK does not charge upfront fees for putting together an IVA.

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Why use an INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)?
Reduce the amount that you pay back in a legally binding way

Stop any further interest charges
Reduce your monthly repayments and be left with more money each month.
Become debt free within 5 years. Most IVA cases are based on one affordable monthly payment, over a 60 month period. Once successfully completed, the debtor is debt-free even though they may not have paid their debts off in full. Any outstanding debts are written off so the debtor can start a fresh debt-free.
IVA Debt Solution

The problem with many debt solutions is that most are not legally binding. This means that although they may greatly reduce your repayments each month, you will still have to pay all of your debt back. Have you ever stopped to wonder just how long this will take?
For example, if you owe £15,000 and normally repay this at the rate of £250/mth, you will be repaying this debt for 5 years. However, if you reduce your monthly repayments to £120/mth to fit your budget, you will be repaying your debt for at least 10 years and, even this is not a guaranteed length of time, because additional interest and charges may be added. This means that there is no light at the end of the tunnel. However, with an IVA, you can clear a percentage of your total debts in five years with interest rates frozen.
 

Who can use an IVA?
The suitability of the IVA solution will depend on your personal circumstances. Normally your personal debts must be above £15,000 with 4 or more different creditors. You must also be able to offer a reasonable monthly payment to your creditors. This will vary depending on the debt. However, as a minimum you will need to be able to afford at least £200/mth.
Any individual, sole trader or partner can use an IVA if they are under pressure from creditors. Some people who own their own homes will use an IVA in order to avoid the possibility of losing it if made bankrupt. Partners and sole traders experiencing business problems might also use an IVA to secure their businesses survival if they are sure of its future profitability. An IVA simply means they can generate income towards repayment to creditors which would otherwise have to call upon the personal assets of the individual. It also enables the business to continue trading, something that bankruptcy would not enable.

You only pay back a percentage of your debts. If you follow the agreed terms, you will be debt free in 5 years time. Up to 75% of your debt may be written off. This is a legally binding solution so no further interest or charges can be added to the debt. Enforced by law creditors can’t change their mind once they’ve agreed. You also get protection against possible court action. Agreed monthly payment plans will remain fixed unless your income level dramatically increases. It is a private agreement – only you, your advisor and your creditors need know about it. There is no publicity in the local papers, as is the case for bankruptcy. You can continue to practise as a professional person (i.e. accountant, solicitor, doctor etc) or as a director of a company and can hold public office, as an IVA does not affect your professional status. You can open a regular bank account, without an overdraft facility and have no/fewer credit restrictions than if you go bankrupt. You can safeguard your property, as the proposals can be made flexible to suit personal circumstances.   If you have equity in your house, an endowment policy linked to your mortgage, or valuable assets you may be required to release them in to pay your creditors. (This is usually done near the end of the arrangement). However this is preferable to repossession and enables you to safeguard and retain your home. Normally, an IVA cannot be used if your total debts are under £15,000. You must be able to afford to make an offer of repayment to your creditors. Generally you need to be able to afford monthly payments of £200 or more If you fail to keep up the payments set out in the agreement, your creditors WILL be able to take other action against you, which could result in bankruptcy, and your home could still be at risk if not specifically excluded from your IVA proposals. In their bargain to allow you to avoid bankruptcy, IVAs are expected to be for a longer period than bankruptcy (ie 5 years). People who go bankrupt can be discharged from bankruptcy within between 1 and 3 years. So it takes longer to be debt-free.

IVA Dos and Don’ts
DO Remember, an Individual Voluntary Arrangement (IVA) is be legally binding. As long as you keep up the repayments, when the term of your agreement is finished, you will be free from these debts regardless of how much has been paid off. During the period of your arrangement your financial situation will be reviewed regularly to see if there has been any change in your circumstances.

DO make sure your IVA offers a better return to creditors than they’d get if they were to petition for your bankruptcy.

DO be honest about what assets and earnings you have/will make. False declarations can affect the success of the IVA.

DO NOT confuse an Individual Voluntary Arrangement (IVA) with an Informal Debt Management Plan, which is not legally binding.

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