The Individual Voluntary Arrangement (IVA) was introduced as part of government legislation in 1986 to help people in financial difficulty and is a formal alternative to bankruptcy. It is a formal agreement between you and your unsecured creditors, whereby you pay an affordable amount of money each month, usually for 5 years. The total that you pay is then divided between your creditors and is accepted in full and final settlement of your debts. An IVA can only be administered by Licensed Insolvency Practitioners such as Debtfocus Business Recovery & Insolvency Limited.
Who can qualify for an IVA?
Anyone in England, Wales and Northern Ireland with an acceptable level of disposable income, and debts over £15,000, with 3 or more creditors that they cannot pay. However, your assets as well as your liabilities will need to be considered to decide on an appropriate solution.
How long does an IVA last?
An IVA would normally last for five years, however it is possible to complete it in a shorter period e.g. were a lump sum is introduced into the arrangement in full and final settlement.
Will I need to pay fees to set up an IVA?
Fees are payable but your creditors will normally agree that they be deducted from your agreed payments as an allowable cost of the arrangement.
How do I know how much I will have to pay through my IVA?
This is agreed once we have carried out a detailed review of your income and priority expenses (e.g. mortgage, rent, council tax. utilities, food etc) and have negotiated with your creditors. But the whole point of an IVA is to make your new monthly repayments affordable.
Will my creditors agree to an IVA?
An IVA is seen by the majority of creditors as a better alternative to one of their debtors becoming bankrupt. For an IVA to proceed at least 75% in value of your creditors need to accept the proposal.
What happens if my circumstances change?
Should your circumstances change, it can be requested that the terms of the IVA be altered to reflect your new circumstances
Will my credit rating be affected?
By the time they approach us, most people have defaulted on their credit commitments under the consumer credit act as they cannot afford the repayments, and therefore their credit rating has already been affected. Whatever solutions is then used to solve the problem will not repair their credit rating, this will only happen once creditors have been repaid and a new history of payments shown.
Will my home be safe?
When you are in an IVA you won’t usually have to sell your property. However you may be required to release equity by taking out a remortgage in the last year. This is however based on affordability alond with other criteria required by lenders.
What if I have a lot of equity in my property?
If this is the case then an IVA may not be suitable and we will advise you on an alternative debt solution
Can I still have a bank account if I’m in an IVA?
Yes you can. However if you owe money to your current bank it may ne necessary to open an account with a new bank so that your debts are all dealt with in the IVA.
Can I set up an IVA if a Bankruptcy Order has been made against me?
If the Bankruptcy Order has already been issued an IVA can still be proposed to your unsecured creditors, and if accepted the bankruptcy order will be annulled.
Will my creditors stop calling and writing to me?
Yes. Once your IVA is accepted, your creditors are legally bound by the arrangement and will no longer continue to request payments, telephone you or send you letters. All correspondence will be dealt with by Debtfocus and as long you make your agreed monthly payment, you will be free from debt in 60 months legally.
Will interest and charges be frozen?
Yes. One advantage with an IVA is that, once your proposal is accepted, all interest and charges will be legally frozen from that date.
What happens after I have cleared my IVA in 5 years?
You will have become debt free and can get on with your life without debt.