Individual Voluntary Arrangements Explained

Living with debt is a daunting experience, and it can be hard to know where to turn and who to trust for help. We hope with the following information you will be able to find a way forward you’re happy is right for you.

An Individual Voluntary Arrangement (IVA) is a solution that is usually taken if you have debts over £12,000 and acts as an alternative to bankruptcy. The IVA allows you to pay a monthly payment that you can realistically afford usually over 60 months.

Here at Moneyextra we provide debt advice. We are here to discuss your worries, concerns and current circumstances; we can then provide you with advice about what options and solutions are available to you to manage your debts and if an IVA is the most appropriate solution. Our fully trained debt advisors are available to take your call and answer any questions you have. You can call us on:

0800 093 3537 or complete our Debt Test

Discover the solution best suited to you or speak to our debt advisors now for instant debt advice via live chat. It is important to remember that you do not need to commit to the solution we recommend we are here to help and advise you of your options, however if you do wish to progress with an IVA we will refer you to the market leader Debt Free Direct.

Testimonial of an IVA customer

"My wife and I purchased a new property and took out a loan to fund the deposit. We relied heavily on credit cards to fund our living expenses and household bills and as time passed we found that our income wasn't covering the loan and credit card repayments.Everything seemed to be going in a downwards spiral; we owed £40,000!

We were worried about the monthly payments towards our loan and that we couldn't meet our mortgage repayments; but we were mostly worried about losing our home, we didn’t know what to do.

We went to the Citizens Advice Bureau for advice first. They provided us with a financial statement and asked me to contact our creditors, however the agreement wasn't binding.A friend recommended speaking to Debt Free Direct who offer solutions which are legally binding.

I called Debt Free Direct and spoke to Graham; they provided a fabulous service and Graham was really friendly, he went through all our income and debt details with me before recommending an Individual Voluntary Arrangement (IVA) as the best solution to manage our finances and to protect us from loosing our home.
I am more relaxed now I am in the IVA, I can cope with the finances and my monthly payments and most importantly my wife is happy again and the worry has stopped. We have been in the IVA for 7 months. Thank you to Debt Free Direct for a fabulous service I really appreciate how much they have helped us."

Mr & Mrs McGlashan, West Sussex
Source: Debt Free Direct
Website: www.debtfreedirect.co.uk/debt-help/iva-mx

What is an IVA and how does it work?

If you wish to progress with an IVA the following process usually takes place:

• A detailed proposal is created on your behalf by the IVA provider.
• Your creditors must vote in favour or against the IVA, (the IVA is likely to be accepted if creditors who own 75% of the debt or more approve it).
• If accepted the IVA is a legally binding contract between you and your creditors and you will not incur any further charges or interest on your debts over the period of the IVA.
• Your creditors will stop contacting you.
• An Insolvency Practitioner is required to set up an IVA.
• If the IVA is agreed. You make one affordable monthly payment to your IVA provider for the period of the IVA.
• Your IVA provider would then distribute the payments to all of your creditors on your behalf.
• A fee is also included in your monthly payment which is paid to your IVA company.

How much will I be required to pay?

The monthly payment you make to your IVA provider depends on your income and expenditure. This is agreed in your IVA contract so that it will be affordable to you. A standing order authority will be set up and your first payment must be made within one month after your IVA proposal has been agreed with your creditors.

Why would my creditors accept an IVA?

In accepting an IVA, your creditors will expect to get a better return than they would from any other reasonable alternative, and your payment proposals should demonstrate this to be the case. Your creditors will also benefit from the fact that your IVA will be monitored.

Will my house be affected?

One of the main benefits of an IVA as a solution over bankruptcy is that your home will not be repossessed. If you are a homeowner, there is a possibility you will be asked to release part of the equity in your home to pay towards the arrangement.

What happens at the end of the IVA?

As long as the terms of the IVA have been fully met and the creditors who were included in the agreement have no further claim against your case then you do not need to pay additional moneys to the original debt amount.

Are there any other options?

Here at Moneyextra we can assess your current debt situation and personal circumstances, and provide you with advice about the least drastic debt solution to manage your debts, all of our advice is provided without obligation, you can call us on 0800 988 9323.

If an IVA is an option and you wish to find out more, we will refer you to the market leader Debt Free Direct.

Debt Free Direct are a member of DEMSA (Debt Management Standards Association), with a strict code of conduct which is approved by the Office of Fair Trading.

What fees will I be charged during the IVA?

Debt Free Direct's IVA fees are agreed directly with your creditors and are included in the affordable monthly payment you make each month. As all IVA providers work under the same guidelines this means that their IVA fees are in line with everyone else including debt charities and fees will not be charged until the IVA commences and is approved by your creditors.

A Case Study on fees from Debt Free Direct

Mrs Smith had debts of £44,000. We negotiated an IVA with her creditors. Now Mrs Smith pays £269 per month. Over the course of the IVA Mrs Smith will pay pack £16,140 in total meaning she will repay 37% of her debt and the remaining 63% is written off. The £16,140 she will repay includes all our fees. Based on her circumstances, the fees we (Debt Free Direct) will be paid are £3,340 over the 5 years of the IVA. The £269 she pays monthly is the only payment she makes.

To find out more you can also contact Debt Free Direct directly on 0800 230 0132 or visit http://www.debtfreedirect.co.uk/debt-help/iva-mx/

IVA Details

You may find additional information in the debt sections on the following websites useful reading: