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What is an IVA?
Individual Voluntary Arrangement plans (IVA) are a type of debt solution designed to enable people in England, Wales and Northern Ireland to pay back some of their debt and ultimately become free of debt. But how do you get an IVA and how does it work? Legally binding, an IVA enables you to make an affordable payment each month over an agreed period; usually 5-6 years. As long as you keep to the agreement and make your payments on time, your creditors will not be allowed to take any further action against you and at the end of the agreed period you will be free of any remaining debt. Like any debt repayment plan, there are both pros and cons to an IVA. Debt Advice Bureau can of course help you see what these are in relation to your personal circumstances and show you how to get an IVA plan that is best-suited to your personal situation and requirements.
How does an IVA work?
If you enter an IVA, you will usually be required to make 60-72 affordable monthly payments towards your debt, or be given the opportunity to make a one-off lump sum settlement. For you to be approved for an IVA, 75% of your creditors must agree with the proposal. However, once approved, you will be protected from any legal action to recover your debt. Your finances will be reviewed annually and you will be notified once the IVA process is complete.
Is an IVA my best option?
IVAs are the best option for many as they are legally binding with your creditors and debt is usually cleared within 5-6 years. Assets can be kept and a payment structure is made that suits your situation. However in order to get an IVA, rules can be very strict and needs to be kept to. If it fails then there is a risk of bankruptcy. Certain professions can also be affected by insolvency, so check your contract of employment before going forward with an IVA. Whether you’re accepted onto an IVA or whether other options such as Debt Relief Orders (DRO) or Bankruptcy are better options, depends on certain criteria. Complete our quick online assessment to see which is best for you.Take our quick online test
What are the Different Stages of an IVA?
Your financial situation will be assessed to calculate how much you can afford to pay each month. Your creditors will then be contacted to see whether this amount is acceptable to them. If they agree, a Statement of Affairs will be drawn up and submitted to the Company Insolvency Practitioner (IP) in charge of your case.
Once it is agreed that an IVA is the best route for you, the IP will then formulate plans for a formal agreement between you and your creditors that will contain all details of your debt and the repayment plan. If both parties agree and no modification are required, you and your creditors will then sign the agreement. Once this is done, the agreement is legally binding.
The IP in charge of your agreement will supervise any requirements made by your creditors, such as the disposal of any assets. You will then begin making your monthly repayments, with the IP monitoring these for the entire duration of the agreement.
Once all payments and any other terms of the agreement have been fulfilled, you will be free from your debt and any outstanding balance you owe written off.