Individual Voluntary Arrangement FAQs

Individual Voluntary Arrangement FAQs

Here are some answers to your frequently asked questions about Individual Voluntary Arrangements (IVA)s.

What Is An IVA?

An IVA is a formal, legally binding agreement between you and your creditors that replaces your original agreed loan payments and enables you to make monthly repayments that satisfy their criteria.

What Is The Purpose Of An IVA?

The purpose of an IVA is to help a person who is struggling to pay off large unsecured debt come to an arrangement with their creditor about future payments. The IVA will specify the amount and level of future payments in order that debts are reduced and the creditor receives regular monthly payments.

How Is An IVA Calculated?

An IVA is calculated by working out what you can afford to pay when taking into account your living expenses and other debts. This amount has to be agreed by your creditors in order for the IVA to become operational.

How Do You Qualify For An IVA?

Here are some criteria for qualification for an IVA:

  • In regular employment (including self-employed)
  • Resident in England, Wales or Northern Ireland
  • Total debts of more than £15,000
  • Money owed to more than three lenders
  • Struggling to make monthly repayments

How Is An IVA Arranged?

An IVA is arranged in conjunction with an insolvency practitioner who will draw up a proposal on your behalf. The document will give creditors a breakdown of your financial circumstances and outlines a proposal covering the amount of money you can afford to pay and the time period you can afford to pay it over.

How Much Does An IVA Cost?

The cost of an IVA depends on the amount of work required by the insolvency practitioner. They would charge a fee which is added to the IVA arrangement and forms part of your monthly payments. You will not have to pay an additional fee to the insolvency practitioner.

How Long Does It Take To Set Up An IVA?

The process for setting up an IVA is around two months in total. This includes notice times for creditors, consultation, negotiation and finalising.

What Happens At The End Of An IVA?

Once the term of the IVA has been completed, you will be free from debt even though all the original debt may not have been repaid: your creditors will be legally bound to write-off the outstanding unpaid debt as specified in the IVA. A certificate of completion will be issued by your insolvency practitioner or debt management professional which will be reflected on your credit file.

How Will An IVA Affect My Credit Rating?

The establishment of an IVA will be noted on your credit history and it will stay on your records for approximately six years. You will not be able to apply for credit during that time and so the effect of establishing and IVA is poorly reflected in your credit rating.

Alternatives To An IVA

There are other alternatives to an individual voluntary arrangement which are:

  1. Debt Relief Orders
  2. Debt Management Solutions
  3. Bankruptcy

You should consult with a professional debt company before making a decision.