Individual Voluntary Arrangement
An individual voluntary arrangement (IVA) is a formal and legally binding agreement between you and your creditors to pay back your debts over a period of time. This means it’s approved by the court and your creditors have to stick to it.
An IVA can be a good debt solution and is only available for individuals or couples with unmanageable debt problems but there are risks to consider.
Before entering into an IVA it is important that you fully understand the advantages & disadvantages of this type of debt solution. These can be found in the Frequently Asked Questions section below or on the homepage of our website here.
Free and impartial money advice is available from the Money Helper, an organisation set up by the Government for people in debt.
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A debt advisor will make a full assessment of your financial circumstances which must be approved by the insolvency practitioner. This could be monthly payments, a lump sum, or a combination of both.
The repayment plan should be based on an amount you can reasonably afford, and the creditors will need to agree it. If you’re making monthly payments the IVA will usually last for 5 years for a tenant or 6 years for homeowners.
Any repayments will be paid directly to the insolvency practitioner. They will then distribute the money to your creditors. Some of this will be kept by the insolvency practitioner to pay their fees.
Regardless of who supervises your IVA, there will be fees associated. This is due to the nature of the IVA and the process involved, however the costs and fees involved in an IVA (Individual Voluntary Arrangement) can be worrying for people already struggling with their finances.
We recommend our clients to our Insolvency partner Johnson Geddes, and they do not charge any upfront fees for setting up your IVA. Instead, once your IVA has been approved, any fees will be taken from your agreed monthly payments.
Including your fees within your monthly payments, however, will not affect or increase the amount you pay each month. This is because your creditors agree to a lower repayment to cover these costs. You simply pay the amount agreed in the IVA proposal and your Insolvency Practitioner will distribute the funds to cover the fees and your creditor repayments. If there weren’t any IVA fees you would still pay the same amount each month anyway.
The nominee fee is the cost incurred while assisting you when putting together your proposal to creditors. The Nominee (who is also a Licensed Insolvency Practitioner) will re-confirm your income and expenditure and all the information that we collect when submitting your IVA. They will also consider your assets, discuss with you whether an IVA is right for you, check you meet the criteria and help you put together a proposal that is likely to be accepted by your creditors. An IVA requires a specialist, qualified practitioner to set up the IVA which is why there is a cost. The actual fee largely depends on which practitioner you use and who your creditors are, but it will usually either amount to the value of the first five months of your IVA payments or £1,000, whichever is the greater. This is how Debt Support Direct is funded, we are paid a fee by the insolvency practitioner for pre-qualifying and collating all of the information required at the start of the IVA process.
The Supervisor fee is there to cover the ongoing costs of the IVA and is usually set at 15% of payments into the IVA. This fee is usually paid once the nominee’s fee has been paid in full. Your Nominee will become your supervisor once your IVA is approved and they will be on hand to answer any questions or concerns you may have throughout your IVA. They will also conduct annual reviews to check your income and expenditure is correct and you can still afford your monthly payments.
Disbursements are payments made to third parties involved in your IVA, to cover essentials such as the registration fee that comes with being added to the insolvency register. There is no available legal aid to assist with the setting up of an IVA, but our Insolvency Practitioner partners do not charge upfront fees. You won’t have to worry about these fees as these will be also deducted from your monthly repayments.
In the unlikely event that you find you can pay the full amount of debt owed at any point throughout your IVA, bear in mind that you will then be liable to pay these fees on top of your outstanding debt.
It is important that you fully understand all the Pros & Cons of entering into a debt solution like an IVA. Further down this web page we have compiled a list of FAQs’.
Simply complete the form to see if you qualify for any of the available debt solutions.
A friendly & experienced advisor from DSD will contact you to discuss yourc ircumstances.
They will explain all your options, so that you can decide which solution works best for you!
An IVA is a formal insolvency solution that allows you to deal with *unsecured debts that you cannot afford to repay. In an IVA you agree an affordable repayment plan with your creditors (the people you owe money to), which can be a monthly repayment or a lump sum (if you can gain access to it). You usually pay less than what you owe in an IVA and on completion of the arrangement, any remaining debts are written off.
*Unsecured debt refers to debt that is not secured against an asset or protected by a guarantor. This includes debts such as credit cards, store cards, overdrafts, and some loans.
Insolvency is the term given to a person or company that is unable to repay their debts, on time, as agreed by their creditors. There are different types of Insolvency solution available for dealing with debts.
Any business or individual that is struggling with repaying their debts may be eligible for an IVA, however there are certain criteria (see below) where an IVA is better recommended for both you and your creditors over other Insolvency solutions, such as Bankruptcy.
The criteria where an IVA may be favoured over other Insolvency solutions are as follows:
It is not possible to do an IVA on your own. An IVA is a legal debt solution, and you will need the assistance of a professional called an Insolvency Practitioner (IP) to apply for one. The IP will also supervise and monitor your IVA for its duration. An Insolvency Practitioner is the person qualified and licensed to act on behalf of someone who is Insolvent. Most IPs are accountants or insolvency specialists.
There is no clear answer for this. It really depends on your financial situation and your own choice of which you feel is right for you. IVAs and Bankruptcy are two quite different Insolvency procedures that can both deal with your debts. They also have some similarities. Knowing which is better for you is dependent on your circumstances. Certain factors of each Insolvency solution will affect you differently. For example:
There are also certain factors in both solutions that are similar. For example,
Debts that can be included in an IVA are:
A standard IVA usually lasts for 5 years (60 monthly payments), although it can be completed in as little as 12 months if you can propose a lump sum payment to settle your debts.
If you are a homeowner with equity, this will be reviewed in the final year of your IVA. You may be required to introduce some of your share of the equity into the agreement. If this is not possible then your IVA could be extended for up to another year. This will all be explained in detail prior to applying for an IVA.
The benefits of an IVA can be quite compelling, especially if you have problems with debt:
If you’re considering an IVA then it’s important you take everything into consideration, including the small print.
No two IVAs are the same. Your monthly IVA payment is completely unique to your circumstances. It is calculated by analysing your living situation, income, expenses, your priority debts, and your unsecured debts. The money left over each month after all expenses and priority debts (but not including other debt repayments) are paid will be your IVA payment.
Most creditors are fully aware of an IVA and what it is, as it has been in existence for over twenty years. If 75% of your creditors by debt value vote in favour of your IVA, then all creditors are bound by its terms. Creditors can suggest alterations to your proposal, and you can choose whether to accept them or not. If your creditors vote against your proposal, you still have the option of an informal arrangement or other solutions. Creditor’s favour IVA’s over some other Insolvency solutions as it shows you have a willingness to try and pay back what you can and gives them a return on their money outstanding.
An IVA must be approved by more than 75% (by debt value) of your creditors at a meeting of creditors. On some occasion’s creditors may reject a proposed IVA. The most common cause is that they are not happy with the proposed arrangement and it is not at a level that meets individual creditor guidelines. If your IVA proposal is rejected at Meeting of Creditors, it may be possible for your IP to make amendments and re-propose the IVA if you are able to offer a revised IVA payment. If this is not the case, you will have other options available to deal with your finances. We can discuss this with you further.
Yes. Your credit rating is affected in an IVA. It will be noted on your credit file that you are in an IVA and your credit rating will be affected for up to 6 years. However, bear in mind that if you are struggling to repay your debts before seeking help and you have missed payments, then chances are your credit rating is already affected and will continue to deteriorate. The consequences of not addressing your debt problem could be just as harmful to your credit rating. Any debt solution you enter will affect your credit rating because you are no longer paying your agreed contractual repayments with your creditor. After the 6-year period of your credit rating being affected, your credit rating will start to repair.
When you are in an IVA all your current credit agreements will be stopped. You are not permitted to obtain any new credit until after your IVA is complete.
In some cases, you may be required to change bank accounts, while your IVA is being prepared. This is because if the bank involved is also a creditor involved in your IVA, they may attempt to remove money from your account for any debt outstanding. A new bank account with a creditor that you have no debts outstanding with, will prevent any issues like this. We can let you know if any of your creditors are linked to your current bank account.
Generally, your job will not be affected in an IVA, but there are some professions where doing an IVA will mean you can no longer practise in that profession, or you will be able to practise but with certain restrictions. i.e., if you are in a role related to finance, law, or accountancy. If you are worried about how an IVA might affect your job, you could check the conditions of your contract to make sure.
We offer a complete guarantee of confidentiality and privacy in relation to your financial affairs. We will never disclose any information about you to any outside organisation and will never say who we are when we call you. This means that you can feel safe in providing your contact information, without worrying that others will find out that you are seeking our help.
Insolvency Register is a public register available online. It contains searchable information on any Insolvency solution, such as Bankruptcy, IVA’s and Debt Relief Orders. Anyone who is currently in one of these solutions will have their details on this register. When your Insolvency solution is complete your details will be removed from the register (this can take a few months).
It is important that you keep up repayments on your IVA as failure to do so could result in failure of your IVA and may lead to Bankruptcy. In saying that, an IVA lasts for a significant length of time, so it is not uncommon for the odd problem to arise throughout its term, causing you to miss a payment.
If you are worried that you are going to miss a payment you need to contact your supervisor immediately. There may be options open to you, such as a payment break if your missed payment is deemed as an emergency, or you might need your IVA payments temporarily altered. Any missed payments will need to be accounted for and will most likely be added at the end of your IVA. If you have had a significant change in circumstances during your IVA, your IP may need to negotiate amendments to your IVA with your creditors. If your creditors will not agree to the amended terms then your IVA could fail, which could lead to Bankruptcy.
If there is a valid reason a payment break can be arranged with your supervisor or IP. This will in turn cause your IVA to be extended as the missed payments will likely need to be added on at the end of your IVA.
You can cancel an IVA, but it is not advised unless the reasons for doing so are acceptable. Cancelling an IVA can result in serious consequences. It needs a lot of thought and you should discuss it and your reasons why you want to cancel with your IP or supervisor. If after discussing with your IP you want to cancel, then you need state this to your IP in writing. Your IP will fail the IVA and send you a notice of termination. You will still need to address your outstanding debts and be responsible for IP fees. If you do not sort out your debts with your creditors promptly after termination, you could be made bankrupt.
Upon completion of your IVA you will receive your completion certificate. Any remaining debts are written off as agreed and you can start over free of debt. Your creditors will update your credit file. Keep an eye on your credit report in the following months to make sure everything has been updated by your creditors. Your credit rating will begin to repair 6 years after the commencement of your IVA.
Yes, it does. Of course, if you have financial difficulties such as having defaulted on repayments of your loans, then your credit rating may be already affected even before you enter an IVA. If you have a normal credit rating when your IVA commences, then the event of your IVA will trigger negative credit ratings on all your debts in the IVA. This negative credit rating will continue for six years from commencement of your IVA and only after that time has elapsed will your credit rating return to normal. You may have to be pro-active in getting the defaults removed from your credit files after the six years have elapsed.
IVA can be set up within a few weeks of you contacting the firm providing insolvency services – anything from three to six weeks. It does depend to some extent on the complexity of your financial circumstances. However, if the debtor provides the documents and information promptly when requested, it is not unusual for the Meeting of Creditors to be scheduled in the same month as when that initial contact took place. It is remarkable how the lapse times for preparations of IVAs has shrunken in the last few years.