An IVA (individual voluntary arrangement) is normally only suitable for those who have a regular income and are struggling to maintain payments to their current debts.

In order to get an IVA, you must have spare income after you have met your essential living costs each month.

Your creditors will be obliged to agree to an IVA if you meet the other criteria needed to get an IVA plan. Your insolvency practitioner will be able to offer you more specific advice once they know your circumstances.

In order to qualify for an IVA, you must:

Live in England, Wales or Northern Ireland.

Have at least £5,000 of unsecured debt.

Maintain a minimum payment of £70 per-month.

All unsecured debts can go into an IVA. Here are some examples of the debts you can include:

Credit cards – Vanquis, Barclays, Natwest, Lloyds, HSBC, Tesco, Capital One

Unsecured loans – Barclays, Lloyds, Tesco, Wonga, Adverse Credit Loans

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Payday Loans – Wonga, Lending Stream, Amigo, Satsuma, QuickQuid

Catalogue and store card debts

Credit Cards

Personal Loans

Overdrafts

Gas, electricity, and water bill arrears

Tax credit/ benefit overpayments

Debts to family and friends

Other outstanding bills

Pros of an IVA:

▪️ No upfront fees.

▪️ It’s affordable. You only pay back what you can afford and that is normally only an agreed percentage of your debts.

▪️ You only make a single payment each month and that payment is distributed to creditors on your behalf.

▪️ You can be debt free, usually after 5 years.

▪️ All creditors must agree to the terms and conditions of the IVA, once approved. You are protected by the rules and regulations of the agreement.

▪️ By law, all interest and charges are frozen as long as you maintain your payments.

▪️ Creditors will not be able to excessively pressure you while they are under the influence of the legally binding IVA.

▪️ You won’t be forced to sell your home. Your home is a protected asset in an IVA.

Cons of an IVA:

▪️ IVAs can be refused. Your creditors can refuse your IVA proposal but, in most cases, we can negotiate with your creditors to get your IVA approved.

▪️ An IVA is a formal agreement. You need to make sure you comply with the terms and conditions attached to an IVA.

▪️ Your monthly repayments may leave you with a tight budget while your debts are being repaid.

▪️ It will affect your credit score. IVAs remain on your credit file for 6 years from the day they starts. Some IVAs can last longer, however, and this will show on your credit file for longer.

▪️ Not all debts can be included in an IVA. Some examples of these debts include student loans, child support and maintenance, magistrate court fines, and social fund loans. However, an allowance can be given to enable you to continue repaying these specific debts.

▪️ If you fail to make the payments due under the terms of your IVA then your arrangement could fail.

An IVA (Individual Voluntary Arrangement) was introduced as part of The Insolvency Act 1986, helping debtors to pay off their debts over a set period of time. It acts as an alternative to bankruptcy.

An IVA is a legally binding agreement made between a debtor and their creditors. Due to the legality and regulations imposed on Insolvency Practitioners, there is a set process each IVA application must follow. You must:

▪️Complete A Review & Budget

▪️Prepare Your Proposal

▪️Create a meeting of Creditors (MOC)

An IVA (individual voluntary arrangement) is not free. Legally you cannot set up your own IVA. The insolvency practitioner who will set up your IVA will charge a fee.

This fee is normally taken as regular instalments from the payments you make towards your IVA (debts). The fee is to cover the cost of the advice offered by the insolvency practitioner, the time spent putting together the legal aspects of the IVA and negotiating with your creditors, also managing the IVA once it is set up.

Missing your IVA payment can be very risky. You must keep your insolvency practitioner up to date with your current financial situation at all times. Late payments may be excused if you have a good enough reason to why you were unable to meet the deadline.

Once you have missed 3 payments then your practitioner will send you a “Notice of Breach”. Normally, you will be allowed between one and three months to correct the problem explaining the missed payments and paying as soon as possible. Once you do this, your creditor will not frantically chase you down any more. However, they will still be able to arrange basic contact with you because, at the end of the day, you still owe them money.

Talk to your practitioner as the terms of your arrangement may be changeable. However, your practitioner can also terminate your IVA or apply to the court to make you bankrupt.

You should always speak to your IVA provider as they will try to help you if difficult situations like this arise.

If you own your home, you will almost certainly be asked to get a valuation on your house in the last year of your IVA. If remortgaging the house would raise more than £5,000, you will be asked to remortgage it and any money raised will be put towards paying back your debts. You will not have to sell your home. If remortgaging would extend the mortgage beyond its existing term, or put you beyond the state retirement age when it ends, you will not be expected to remortgage the property.

If you can’t remortgage your house for any reason (refusal by the bank, or complications with a jointly owned property, for example), you will have to pay your usual monthly payments under the terms of the IVA for an additional year.

It is possible but unlikely that you will be able to keep your home out of the IVA and thus avoid remortgaging it. If your insolvency practitioner feels that you will be able to pay back enough of your debts without including your house in your IVA, they may propose that it be excluded from the IVA when negotiating with your creditors, but this rarely happens.

An IVA is a preferred option by many homeowners as your asset is protected whereas the alternative of bankruptcy you would in most cases be asked to sell you home.

If you rent your home, nothing will happen as long as you keep paying your rent but we would always advise for you to check your tenancy agreement before entering any agreement.