What is an IVA?
An
Individual Voluntary Arrangement
also known as an IVA is a formal
solution for individuals that
have unsecured debts and are
struggling with
repayments.
An IVA
is administered and managed by
an Licensed Insolvency
Practitioner. It is a legally
binding agreement that helps
people to repay debts at a more
affordable rate and within a
realistic time frame. An IVA is
a piece of government
legislation which was passed
through the insolvency act
1986
An IVA
will usually last for a period
of 5 years and during this time
creditors included in the
agreement will freeze interest
and charges and write off any
remaining debt at the end of the
arrangement.
Individuals
who enter into an IVA are
protected from unsecured
creditors taking further legal
action against them including
petitioning for their Bankruptcy
and they are no longer allowed
to contact them about their
debts.
Advantages of an IVA
Creditors who vote against your proposal are still bound by it.
Creditors whose lending is unsecured cannot take any further action.
Interest is usually frozen as long as you keep up your payments.
Your insolvency practitioner will help you prepare your proposal, including agreeing the level of your household and personal spending based on guidelines acceptable to creditors.
Many insolvency practitioners will allow you to pay their fees for preparing your proposal monthly, as part of the IVA.
You make only a single payment each month. Your insolvency practitioner is responsible for administering and distributing your payments.
The terms of an IVA will usually enable you or your spouse or partner or a relative to make arrangements to buy your share of the net worth of your home or to make extra payments, rather than the home having to be sold. This may be done through a remortgage or a loan. (Net worth means its value after any debts secured on it have been paid).
On completion of the IVA, the balance of what you owe your creditors is written off.
You may be able to continue running any business you have.
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Things to Consider
Your IVA is entered on a public register.
The insolvency
practitioner may require payment in
advance for preparing your proposal
and getting your creditors’
agreement.
If your
circumstances change, and your
practitioner cannot get creditors to
accept amended terms, the IVA is
likely to fail. You will then still
owe your creditors the full amount
of what you owed them at the start,
less whatever has been paid to them
under your IVA.
If there is
some equity (value) in your home
after taking account of the
mortgage(s) on it, you will probably
have to pay for your share, usually
in the fifth year of your IVA, by
remortgaging the property. If you
cannot get a remortgage, you may
have to continue making monthly or
quarterly payments from your income,
for up to another year.
If you fail to
adhere to the terms or your IVA it
may fail and creditors could charge
any interest that had been frozen or
you may be made declared
bankrupt.
Loans from
Family and Friends, Student Loans
and some other debts cannot be
included in your IVA.