An Individual Voluntary Arrangement or IVA  is a debt solution that helps many people avoid going through the severity of bankruptcy.

FOR ADVICE ON AN IVA PLEASE CALL 0800 074 6918

An IVA is legally binding agreement with your creditors in which you have the opportunity to freeze your interest rates and make lower repayments.

An Individual voluntary arrangements,. or IVA, allows a debtor to stave off bankruptcy by coming to an agreement with his creditors to pay off a percentage of his debts over a given period.

IVA Repayments 

The IVA repayments are calculated through an analysis of the debtor’s income and expenditure. Once agreed, the repayment programme forms part of a legally binding contract, although the creditors can still force the debtor into bankruptcy if he does not meet his side of the deal. There is one other catch: an IVA can go ahead only if creditors representing more than 75 per cent of the debt agree to the deal.

The attraction of an IVA 

An IVA also offers many attractions. He avoids the stigma of bankruptcy and the severe penalties. For people whose careers could be put at risk by bankruptcy, such as lawyers and financial practitioners, the IVA is particularly attractive.

If you have enough money left over after paying your priority creditors and essential expenses, you may be able to arrange an Individual Voluntary Arrangement (IVA).

An IVA is a legal agreement with creditors (usually non-priority creditors) to repay your debts. This could either be in part or in full. The arrangement is negotiated, written up and checked regularly by an independent solicitor or accountant called an Insolvency Practitioner. Not all the creditors have to agree to an IVA as long as the creditors to whom you owe 75% of your debt agree.

IVA Example

You have a total of £100,000 debt. You have three creditors:

Creditor A (£6,000)
Creditor B (£70,000)
Creditor C (£20,000)

Creditor C doesn't agree to an IVA but it doesn't matter because Creditors A and B do agree and between them, they have more than 75% of the debt. Creditor C still has to keep to the terms of the IVA.

The costs of setting up an IVA

The costs of an IVA can be high and you may have to pay an upfront fee. If you don't keep to the payments, you can be made bankrupt.

Alternatives to an IVA

Debt Management Plans (DMP) for debt management help

The purpose of Debt Management is to help you clear your debts at a reduced level over a fixed period of time to help you make a fresh start with your finances. Your property is not at risk, there are no legal set up costs, debt management plans are very flexible and the plan can be stopped at any time.

Debt Consolidation for debt management help for all debt problems

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as security, most commonly a house. In this case, a mortgage is secured against the house. Using the security of a property allows a lower interest rate than without it, because by security, the asset owner agrees to allow the reposession of the property to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Individual Voluntary Arrangements (IVA) for debt managment help for debt over £15,000

An IVA is a formal alternative for individuals wishing to avoid bankruptcy.

The IVA was established by the Insolvency Act 1986 and constitutes a formal repayment proposal presented to a debtor's creditors via an Insolvency Practitioner. Usually (but not necessarily) the IVA compromises only the claims of unsecured creditors, leaving the rights of secured creditors largely unchanged.

An IVA is a contractual arrangement with creditors and can be as flexible as an individual's own circumstances; they can therefore be based on capital, income, third party payments or a combination of these.

Creditors take a decision at a creditors' meeting called to consider the IVA proposal. The return to creditors is often higher than they would receive in bankruptcy. A vote is taken - by value. More than 75% in value of those creditors who vote at the meeting by person or by proxy must agree in order for the arrangement to be approved. If any of those voting are 'associates' (usually business associates, friends and family) then a second count is taken and 50% of non-associated creditors must approve it.

Trust Deeds for debt management help in Scotland over £8,000

The Protected Trust Deed (PTD) is a formal arrangement that is used in Scotland where a consumer debtor grants a ‘deed’ in favour of the trustee which transfers their assets to the trustee for the benefit of creditors.

Provided certain conditions are met, the Trust Deed may be registered as “protected”, thereby preventing creditors from petitioning for the debtor’s sequestration.

The main advantage of entering into a trust deed are that it takes the pressure off as all correspondence and the Trustee will handle all of the communications from a persons creditors.

Administration Orders for debt management help under £5,000

An Administration Order is a single county court order that covers credit debts and certain other debts which are all treated together. It allows you to make a single payment every month into the court. The court staff will then divide the money amongst your creditors on a pro-rata basis. An Administration Order stops creditors from taking further action against you.

Bankruptcy for debt management help over £750

Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order (there is the possibility that in some cases the bankruptcy discharge period will be less than one year).

Although bankruptcy has a bad stigma and is publicly advertised, it should always be considered when dealing with individual insolvency cases.

Please note that if your are ever faced with the prospect of bankruptcy you should look at alternatives as soon as possible such as the Individual Voluntary Arrangement procedure (IVA).

If you are thinking that an IVA may be an option for you, you can get advice from an experienced adviser from E-insolvency on 0800 074 6918 .