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Individual Voluntary Arrangements
What is an IVA?
The term IVA stands for Individual Voluntary Arrangement. IVAs are available in England and Wales and can stop creditors from starting bankruptcy proceedings, the Scottish equivalent of an IVA is a Trust Deed. The IVA is a legally binding agreement between you and your creditors, to pay off a set amount of your debt over a given period, typically five years. An IVA is set up through a Licensed Insolvency Practitioner or “IP”.
Who is an IVA suitable for?
An IVA may be suitable for you if you:
- Owe more than £10,000 in unsecured debt
- Are struggling to pay your monthly bills
- Are able to contribute at least £200 a month towards your unsecured debt
- Are facing bankruptcy
- Are facing repossession and bailiffs
- Have large amounts of unsecured debt and have fallen into arrears with your mortgage payments
- Do not have enough money to pay all of your credit card and loan bills each month
- Are living off your credit cards for day to day bills and expenditure
What are the benefits of taking an IVA?
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- Avoid bankruptcy
- Avoid losing your house and home to repossession
- Only pay what you can realistically afford
- Stop creditors contacting you for repayments
- At the end of the IVA your debts will be cleared
- Your job is unaffected this is not the case with bankruptcy if you work in the public sector.
How does an IVA 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.
What can be included in an IVA?
An IVA will only cover unsecured debt such as an overdraft, unsecured loans, credit card bills and store card bills. IVAs will not cover secured debt such as loans secured on your property or hire purchase agreements.
How much will an IVA cost?
IVA fees are always based on individual circumstances and are calculated by looking at your income, monthly expenditure, and level of debt and how much you would pay over the course of an IVA.
Debt Free Direct the market leader of IVA’s will not ask you for upfront fees, nor will they ask you to pay additional fees. You make one monthly payment in an IVA – that covers all our fees.
There are two types of fees in an IVA – A nominee’s fee and a supervisor’s fee:
- The nominee’s fee is for setting up and agreeing the IVA with you and your creditors.
- The supervisor’s fee covers the management of the IVA until it’s completed.
To find out more you can also contact Debt Free Direct directly on 0800 230 0132 or visit their website debtfreedirect.co.uk
What are the disadvantages of taking an IVA?
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- You are not allowed to borrow during your IVA.
- If you fail to keep to the terms of the IVA your creditors can resume collection actions.
- If you have equity in your house i.e. it is worth more than you paid for it you will have to make best endeavours to remortgage towards the end of your IVA and release funds to your creditors.
- The IVA normally stays on your credit history for one year after your IVA ends. This may affect your credit rating although some lenders view your proven ability to make regular payments over 60 months favourably.
What to do next?
Before proceeding with any solution you need to ensure that you have fully explored and understand all of the options available to you. Moneyextra can help. If, after reading this guide you have decided that an Individual Voluntary Arrangement is the most appropriate solution for you then speak to a trained Moneyextra’s adviser today on 0800 988 9323 or via Live Chat. Moneyextra offer no obligation advice to you about debt solutions and can carry out a review of your incomings and outgoings to work with you to assess which is the best option for your personal circumstances, speak to us in confidence now.
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