IVAs

IVA's (England, Wales and Northern Ireland Only)

An IVA (Individual Voluntary Arrangement) was introduced in 1986 as a piece of legislation which allows you to avoid the trauma of being declared bankrupt. An IVA may be an ideal solution if you have significant unsecured debts, are in regular employment and are based in England or Wales.  It is a formal, legally binding agreement between you and your Creditors which normally lasts for a period of 5 years. During this time you will make a single monthly payment over the period in agreement with your Creditors.

The key features of an IVA are the following:

  • Payments are based on your budget and what you can afford. The payment remains the same for the duration of the IVA.
  • No legal action can be taken by your Creditors once the IVA agreement is reached. Similarly Creditors cannot add interest or charges to your debt.
  • The agreement is a private arrangement between you and your Creditors.
  • Our costs are agreed with your Creditors and are paid from the fund set aside for them.
  • We will deal with all administration, and liaise with your Creditors on your behalf.

Advantages

  1. Payments are reflective on what you can afford to pay based on your budget, your income and your expenditure. The payment remains the same for the duration of the IVA.
  2. It avoids the stigma and longer lasting effects of bankruptcy.
  3. The interest charges on your debts are frozen by your Creditors ensuring your debts are not constantly increasing.
  4. On conclusion of the IVA remaining debts will be effectively written off by your Creditors. However an IVA, even once completed, will have a lasting effects on your credit rating and ability to take out loans, credit cards etc.

Disadvantages

  1. If you are a homeowner and have equity in your property, this has to be released to Creditors. There are, however, various ways this can be done without the need to sell your home, i.e. through remortgage.
  2. Creditors can vote against an IVA which can prevent it becoming effective. However,  if over 75% of Creditors vote in favour your IVA will be implemented. Creditors can put forward changes but they cannot force these changes on you – you decide  whether to accept them or not.
  3. Certain professional bodies prevent members from signing an IVA.  For example certain jobs within the Police force and Ministry of Defence. Accordingly, individuals should check their contract of employment. You may not be able to remain a director of a limited company.
  4. You may find it harder to get credit even once the IVA has completed. Creditors, and credit rating agencies, will assess your risk level based on you financial history and this will include your IVA.