The Government introduced individual Voluntary Arrangements (IVA) in 1986 as an alternative to bankruptcy.
The process provides a formal structure based on affordability rather than any previous contractual arrangements and enables you to make more realistic repayments to creditors.
An IVA usually lasts five years – though this can be extended – with people paying what they can afford monthly before any remaining debt is paid off.
Once an agreement is reached, your creditors cannot force you into bankruptcy and promise to legally ‘write-off’ any money still outstanding at the end of your arrangement – providing you successfully reach the end of the IVA process.
What happens during the IVA process?
A licenced Insolvency Practitioner (IP) will help you work out an affordable percentage of your debt to pay off by looking at your income, expenses, and any other debts. They are also responsible for setting up and negotiating payments with your creditors.
Governed by The Insolvency Act 1986, an IVA is a legally binding process, so when your creditors agree to the payments, all parties must adhere to the terms of the arrangement.
Contact the Future Strategy team today, and we can assess your income, outgoings, and debts to let you know if an IVA is the right option for you.
After that assessment, and if you wish to proceed, our IP will start working on your proposal, which will outline your suggested repayment plan to creditors.
Rest assured, we will only put forward a proposal if we think an IVA is the best solution for you and one we believe the majority of your creditors will accept.
Once you are happy, we will send a copy of your IVA proposal to your creditors, who will then decide whether or not to accept it.
If and when your IVA is approved, you can then pay off your debts.
What requirements must I meet to qualify for an IVA?
If you wish to put together an IVA proposal, you must have a minimum of £5,000 worth of eligible debt (i.e., debt which can be included in an IVA).
You must also owe money to at least two different creditors and have an available monthly disposable income of £70 or more.
You can include several debts within an IVA, but exceptions include court fines, child maintenance arrears, student loans, and secured debts (other exclusions may also apply).
Other organisations may have slightly different qualifying thresholds to ours (such as higher or lower requirements on disposable income).
If you are in any doubt about whether or not you qualify for an IVA, please get in touch with us to find out more.
What else should I consider with an IVA?
Once you and your creditors have agreed on an IVA, it’s essential to stick to these terms. Failing to do so could lead to your arrangement breaking down.
If your personal circumstances change after the IVA has started and the IP cannot persuade your creditors to accept amended terms, the whole process will likely fail.
This means you will still owe what you did at the start, minus the sum paid during the IVA.
Your creditors could also again take action against you, and interest may start accumulating on previous debts.
It’s possible that your creditors could reject your IVA proposal, but there is usually a specific reason for this. We can negotiate with creditors on your behalf or even resubmit the proposal if required.
What are the benefits of an IVA?
Providing your IVA is accepted by your creditors, you could enjoy the following benefits:
- Lower and consistent monthly repayments.
- Full legal protection from any creditors who will not be able to contact you, pursue you for payments, or take legal action.
- Once you have paid the agreed contributions and completed the IVA, any remaining debts are written off.
- Interest and charges are frozen.
- Safeguard your property and ensure future affordability.
- Self-employed people or trading businesses can continue to trade throughout the process.
Can an IVA help me if I’m self-employed?
IVA’s were introduced to help self-employed people avoid bankruptcy and carry on trading, making them the ideal solution for those in that area.
Unlike bankruptcy, an IVA is geared towards allowing you to continue working while you clear your debts.
Will an IVA affect me if I own my home?
No. In fact, an IVA has long been a popular choice for homeowners as, unlike bankruptcy, you won’t be forced to sell your family home to complete the process.
An IVA contains agreed rules regarding your property which means that rather than being forced to sell your home, your IVA will instead be extended by 12 months.
Contact the Future Strategy team today if you want advice on your next steps.