What is an IVA?
An Individual Voluntary Arrangement (IVA) is a formal arrangement between you and your creditors which allows you to repay your debts at an affordable rate. An IVA is paid over a fixed period of time (usually 5 or 6 years). After this time, any remaining balances will be written off. It's a popular method of debt management for people who can afford smaller monthly repayments.
Your IVA will be managed by a licensed Insolvency Practitioner who will put forward a proposal towards your creditors detailing why you need an IVA and what you can realistically afford to pay. They will negotiate with the creditors on your behalf, creating much less hassle and stress for you.Check to see if you qualify
After the proposal is signed, a meeting is held with your creditors where they are able to vote on whether to accept, reject or modify the proposals. As long as 75% of voting creditors accept the proposal, the IVA will go ahead.
Once your IVA has been accepted, you will be protected from further collection activity and legal action from your creditors.
Is an IVA right for me?
If you cannot afford to make payments towards your debts as they fall due, then an IVA might be suitable for you. To assess your suitability for an IVA, we will need to have an understanding of your current situation.
Advantages of an IVA
- An IVA is tailored for you and designed to be affordable.
- All interest and charges will be frozen from the date of approval.
- Creditors whose claims are included in the IVA can no longer chase you for payment or pursue legal action.
- You will receive ongoing support from your Insolvency Practitioner.
- Upon the completion of your IVA, any remaining balances will be wiped off.
- If you cannot afford to make payments to your creditors, but there is a lump sum available (perhaps from family) this can be offered to creditors by way of a full and final IVA.
Disadvantages of an IVA
- If you fail to adhere to the terms of the IVA, your assets and home may be at risk
- If an IVA fails because you do not maintain the agreement, your creditors can take further action and you could be at risk of bankruptcy.
- An IVA will show on your credit file and will remain there for 6 years.
- During the term of the IVA, you will not be able to access further credit without first consulting with your Insolvency Practitioner.
What kinds of debt can be included in an IVA?
Most unsecured debts can be included in an IVA such as:
- Credit cards and loans
- Jointly owed debts
- Monies owed to individuals such as family and friends
- Debts to HMRC
- Council tax arrears
- Utility arrears
- Arrears to trade suppliers (if you are self-employed)
- Shortfall from property repossessions
Debts that cannot be included in an IVA include:
- Maintenance or child support arrears
- Student loans
- Court fines or traffic violation fines
All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.
There is free debt help and advice available through a variety of debt charities. For more information, we recommend you visit https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator.
Contact Debt Advisory Service
For more information on getting an Individual Voluntary Arrangement, please contact us for debt advice today on 0808 301 9527 or simply fill out our Debt Advice Enquiry Form.
How Does an IVA Work?
If you decide to go down the route of an IVA, your Insolvency Practitioner will put together a proposal which details your current financial situation. This will include information regarding your assets, liabilities and creditors who you owe money to. It also states the amount of money you can reasonably afford to pay back each month during the course of the IVA.
When you’re happy with the proposal, it will be distributed to your creditors and they will have to approve it. Once approved, you’ll begin making regular repayments which will be monitored by your insolvency practitioner and spread evenly to your creditors.
How Can I Apply for an IVA?
If you want to apply for an IVA and you are certain it is the right option for you, the next step is to speak to a specialist debt advisor or a licensed Insolvency Practitioner. The team will then help you with setting up the Individual Voluntary Arrangement and work out a proposal for you.
Contact our team today if you’d like some more advice on applying or you want to know more about how this process works.
How Long Does an IVA Last?
In most cases, an IVA will last 5 years, but this is not set in stone and it can be less depending on how much you have to pay back. If you are able to offer your creditors a lump sum as part of your repayment, this can reduce the duration of the IVA.
The length could also be extended under certain circumstances, for example if there is property involved. It’s best to discuss this with your debt advisor or Insolvency Practitioner when setting up the agreement.
What Debts are Covered in an IVA?
Most of your debts can be included when you enter an IVA, here are some common examples:
- Personal Loans
- Credit Cards
- Payday Loans
- Store Cards
- Council Tax Arrears
- Gas and Electricity Arrears
- Water Arrears
- Income Tax and National Insurance Arrears
- Other Outstanding Service Bills
However, there are some types of debt which will be excluded from an IVA:
- Secured Loans
- Court Fines
- Student Loan
- Child Support Arrears
- TV Licence
- Hire Purchase Agreements
It’s important to take this into account when thinking about entering an Individual Voluntary Arrangement. If the type of debt you have isn’t compatible, you may want to consider other options instead.
How Does an IVA Affect your Credit Rating?
An IVA will affect your credit rating and it could make it difficult for you to take out loans or get credit in the future. However, a good thing to remember is that if you are in serious debt, your credit rating will probably already be impaired.
Usually the consequences of not dealing with your debt problems will make the situation worse than taking out an IVA or another solution to begin repayments.
How Long Does an IVA Stay on your Credit Rating?
An IVA will remain on your credit file for 6 years from the day it started. So if the duration is 5 years, this means it will stay on your credit file for a further 12 months after it finishes.
During this time, any potential creditors can check your credit score and see that you are in the process of an IVA or you have completed one.
Can I Get Credit After an IVA?
As details of the IVA remain on your credit file for 6 years, it can affect your ability to get credit during this time, so it’s something to be aware of. If you’re trying to get a mortgage or loan after the IVA ends, you will be at a disadvantage compared to someone who has a clear credit record.
This doesn’t mean to say you can’t get credit at all, it just means it may not be as it would be if you had a better score. Bear in mind that while you are still in the IVA process, you won’t be allowed to borrow more than £500 without asking permission from the Insolvency Practitioner.
How Much Does an IVA Cost?
The cost of an IVA will depend on the terms agreed with your creditors. You’ll also have to agree to these fees before beginning the repayment, but they will be deducted from the amount you pay each month so you won’t have to pay anything else on top.
These fees will include the cost of putting the proposal together as well as monitoring the payments and dealing with creditors throughout the rest of the process.