Individual Voluntary Arrangement

If you’re facing bankruptcy, please be aware that an Individual Voluntary Arrangement (IVA) may be more beneficial and less stressful for you. This legal agreement between a debtor and their creditors is an attractive alternative to bankruptcy that typically enables people to keep their home and other assets. An Individual Voluntary Arrangement UK acts as a fair debt repayment plan – it helps you to clear unsecured debt over several years, based on what you can afford.

Contact Irwin Insolvency today to see how our licensed insolvency practitioners can help you to decide if an Individual Voluntary Arrangement is your best debt solution, complete the paperwork and improve your financial health.

How Individual Voluntary Arrangements Work

Individual Voluntary Arrangements are formal, long-term, legally binding agreements aimed at debtors who need to repay £10,000 or more and have two or more creditors. Your IVA is recognised and approved by the local county court. So when your creditors accept it, they’re obliged to abide by its terms and can no longer chase you for money.

Only licensed insolvency practitioners can arrange and manage IVAs; they charge fees for this specialist work. A major advantage of engaging the services of an insolvency practitioner is that they’ll communicate with your creditors on your behalf throughout the lifespan of your Individual Voluntary Arrangement, which will be a weight off your shoulders. Your insolvency practitioner can also deal with any IVA questions or concerns you may have – they’re authorised, regulated and qualified to work in this field.

To check if you’re likely to be able to get an Individual Voluntary Arrangement UK approved and accepted, the insolvency practitioner examines your finances and calculates how much money you can offer creditors. They explain to you what an Individual Voluntary Arrangement would mean for your home and other assets such as your car (you wouldn’t typically be expected to sell them, especially if you have a reasonable surplus income). They also help you to create an IVA proposal, which outlines an affordable debt repayment plan, so your creditors can see who’d be paid what and the timescales.

After your creditors accept your IVA, you must make the monthly repayments outlined in the proposal. They go to your insolvency practitioner, who takes a small, previously agreed fee and divides the rest proportionally among your creditors.

Proposal for Individual Voluntary Arrangements

Because the proposal acts as the foundation for your Individual Voluntary Arrangement, it’s worth discussing in detail here.

The proposal takes into account your monthly income and essential expenses (mortgage/rent, groceries, utility bills, transport, etc.). It highlights how much money you have available after basic living costs have been deducted. As you can tell, the purpose of an IVA is to help you get out of debt and provide creditors with a fair deal without making you struggle financially.

Your insolvency practitioner shoulders most of the responsibility of creating and looking after Individual Voluntary Arrangements. When writing the proposal for you, they need a great deal of financial information. To streamline this process, try to gather the following documents in advance:

  • Payslips/bank statements for the past three months
  • Details of savings accounts
  • Your latest mortgage statement or evidence of rent payments
  • Recent loan statements
  • Vehicle finance details
  • Financial policies, including life insurance, health insurance and pension schemes
  • All recent creditor correspondence

Setting Up Your IVA

When you want to set up an Individual Voluntary Arrangement UK, your insolvency practitioner is appointed as Nominee. In this role, they send your IVA proposal to your creditors, local county court and the Insolvency Service. In certain circumstances, an interim order can then be sought from the court to prevent creditors taking further legal action against you.

In addition to the IVA proposal, the Nominee sends each creditor:

  • Their comments on the proposal, including a comparison of what would happen if you were made bankrupt instead
  • Details of your assets and liabilities, known as a Statement of Affairs
  • Details of the Creditors’ Meeting (which will be at least a fortnight away), at which creditors can accept/reject the proposal
  • A proxy voting form in case the creditor can’t attend the meeting
  • A list of your creditors
  • A guide to fees charged by the Supervisor (a role usually taken by the Nominee), who’ll administer the IVA if it’s accepted

Creditors Vote on the Proposal

At the Creditors’ Meeting, creditors can ask for changes to be made to your Individual Voluntary Arrangement proposal. They’ll consider a range of factors before deciding whether to agree to it or not, including:

  • The amount of money on offer
  • How much you owe
  • The value of your assets
  • Reasons for your debt
  • Your commitment to repayment

Creditors want to feel confident that you’ll meet the IVA’s requirements and pay them back.

Your proposal will be accepted as long as creditors holding 75% of your debts vote for it, as the government’s IVA guide makes clear. So your major creditors will have the biggest say.

Any creditors who disagree with the proposal will still be bound by it if the IVA goes ahead.

It typically takes approximately six weeks to go from enquiring about an Individual Voluntary Arrangement to having the proposal accepted. The IVA itself will normally last five years.

Benefits of Individual Voluntary Arrangements

Setting up an Individual Voluntary Arrangement UK has several benefits:

  • You can avoid bankruptcy and property repossession
  • Debt repayments are consolidated into one fixed, affordable monthly repayment
  • All interest on your debt is frozen
  • Creditors can’t harass you or take legal action
  • You could be debt-free in just five years

What Happens When Your IVA Ends

Under the terms of your IVA, if you own part of your home outright, you may be asked to remortgage six months before the agreement ends to release equity. You’d then pay creditors a lump sum. If you can’t remortgage and/or have missed repayments, your Individual Voluntary Arrangement may be extended from five to six years.

When your IVA ends, and provided you’ve met its requirements, your creditors won’t be able to make any further claims against you and any remaining debt will be written off.

Your insolvency practitioner will notify creditors that the Individual Voluntary Arrangement is complete, and you’ll receive a completion certificate.

IVAs and Bankruptcy – A Comparison

If you’re trying to choose between an Individual Voluntary Arrangement and bankruptcy, it’s sensible to compare and contrast these two paths out of debt.

Like bankruptcy, an IVA:

  • Appears on your credit report for six years
  • Appears with your contact details on the public Individual Insolvency Register until three months after it ends
  • Can affect employment, particularly if you work in finance, accountancy, law or property and therefore deal with large sums of money

However, IVAs are different to bankruptcy in the following key ways:

  • Individual Voluntary Arrangements last longer than bankruptcy – five years as opposed to one year
  • Unlike bankruptcy, IVAs require surplus income
  • They’re subject to different fees. With an Individual Voluntary Arrangement, you pay a set-up/Nominee fee and ongoing Supervisor fees. With bankruptcy, you pay application, deposit and court fees (unless the latter are waived).
  • Unlike bankruptcy, IVAs are unlikely to lead to the loss of your home or car

Individual Voluntary Arrangement FAQs

What is an Individual Voluntary Arrangement UK?

It’s a legal agreement managed by an insolvency practitioner that enables you to repay some/all of your debt over time (normally five years) at an affordable rate. It’s a fair deal for you and your creditors.

An IVA can cover many kinds of unsecured debt, including:

  • Personal/payday loans
  • Credit/store card and catalogue debts
  • Overdrafts
  • Tax/National Insurance bills
  • Council Tax and utility bills
  • Rent arrears from previous homes
  • Solicitors’, tradespersons’ and vets’ fees
  • Money borrowed from family/friends

What happens when you get an Individual Voluntary Arrangement?

Getting an IVA means you’ll make a fixed repayment each month. You’ll live on a strict but realistic budget that covers essential expenses.

You’ll be in regular contact with your insolvency practitioner. They’ll review your finances annually to see if adjustments need to be made to the IVA.

Although you won’t have a luxurious lifestyle, you’ll enjoy peace of mind, as you’ll be taking a proactive approach to settling debt and getting closer to being debt-free every month.

What are the pros and cons of Individual Voluntary Arrangements?

IVAs have a variety of pros and cons – it’s important to be aware of the following.

Advantages of IVA’s

  • Affordable solution to unsecured debt
  • Keep your home and other essential assets
  • No legal action from creditors – you don’t even need to talk to them
  • No visits from debt collectors
  • Debt won’t increase
  • Only one repayment per month
  • Short repayment breaks can apply in exceptional circumstances
  • Any remaining debt is written off when the IVA ends if you’ve kept up with repayments

Disadvantages of IVA’s

  • Spending is limited to essentials
  • Damages your credit score
  • More difficult to borrow from lenders
  • You may need to remortgage
  • You could face bankruptcy if you don’t make repayments

Does an Individual Voluntary Arrangement UK affect my credit rating?

It negatively affects your credit rating and appears on your credit report for six years. During that time, it’ll be harder to obtain credit and competitive interest rates. You’ll need your insolvency practitioner’s written permission to borrow over £500.

But bear in mind that an IVA is a clear route out of debt, so should have less impact on your credit rating overall than failing to tackle the problem.

What’s the minimum IVA payment per month?

Because IVAs reflect what each debtor can afford, there’s no set minimum monthly repayment. However, people setting up an Individual Voluntary Arrangement usually need surplus income in excess of £100 per month; otherwise the proposal won’t appeal to creditors.

If you receive a windfall, pay rise or additional assets during your IVA, you’ll need to pay creditors more.

Will HMRC accept an Individual Voluntary Arrangement?

If the bulk of your debt is owed to HMRC (for example, you may have considerable income tax or National Insurance arrears or overpaid tax credits), they’re unlikely to agree to an IVA.

But if HMRC isn’t a major creditor, they may well agree to you making repayments to them this way, as Citizens Advice makes clear.

Can joint debts be included in an IVA?

Yes, but this won’t free the other debtor from the responsibility of making repayments.

A better option could be to each set up an IVA and link them, creating what’s called an interlocking IVA. You make joint repayments, and your agreements are administered together.

What can you NOT do with an IVA?

Although there’s no limit on the amount of debt Individual Voluntary Arrangements can cover, they can’t be used to repay the following:

  • Secured loans, such as mortgage arrears
  • Rent arrears for your current home
  • Child support/maintenance arrears
  • Social Fund loans
  • Student loans
  • Fines
  • Hire purchase arrears
  • TV Licence arrears

Need an IVA? Contact Irwin Insolvency

An Individual Voluntary Arrangement offers you an effective way to clear debt, protect your home and regain control of your financial affairs, all without financial hardship or the pain of bankruptcy. Like other methods of dealing with debt, IVAs carry risks, so you should consider the negatives as well as the positives before arranging one.

It’s also important to seek expert IVA advice and guidance in order to make a well-informed decision. Thankfully, you can rely on our experienced UK insolvency practitioners to help you navigate Individual Insolvency Arrangements and the insolvency process. We offer a comprehensive Individual Voluntary Arrangement UK service. Simply provide accurate information about your financial circumstances and we’ll take care of the rest.

Our insolvency practitioners will determine whether an IVA is suitable for you. If you choose to arrange one, we can set up and manage it for you too.

You could clear your debt with an Individual Voluntary Arrangement UK – call Irwin Insolvency today on 0800 2545122 to get started.

Get in Touch

With over 25 years of experience, helping people just like you, we are committed to providing you with all the help and advice you need during these challenging times. Simply give us a call, drop us an email or fill in the form to find out how we can help you.

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