An Individual Voluntary Arrangement or IVA is available to those who live in England, Wales and Northern Ireland. It is a lawfully binding agreement between you and creditors. Like a Scottish PTD, it allows you to repay debt over a manageable time, allowing for a structured approach to managing debt, without having to declare bankruptcy.
An IVA is a court approved arrangement, meaning both you and your creditors are legally required to comply with the court arranged terms. They typically last from 5 to 6 years and once completed successfully the remaining unsecured debt is written off.
During the term of the IVA creditors cannot chase you for payments or charge additional interest on the agreed debts. An Insolvency Practitioner or dept management company handles all communication, protecting you from harassment by creditors during that time.
Process:
During the IVA, agreed upon payments in the form of a monthly sum or a one-off lump sum can be made once approved by the creditors. They are always based on what you can reasonably afford to ensure a successful and sustainable plan.
Creditors will be asked to vote on whether they should accept the proposal of debt repayments. If enough creditors vote in favour, the IVA can go ahead.
What can I put in my Proposal?
Priority debts such as arrears from council tax, bills and owed tax can be included, along with personal loans, overdrafts and credit cards.
What’s not Included?
- Maintenance or arrears ordered by a court
- Child Maintenance or Child Support Arrears
- Magistrates Court Fines
- Mortgages, or secured loans like car loans and student loans
How Much will an IVA Leave me to Live on?
Living with an IVA, can still leave you with a fair lifestyle. The best way to ensure this is to be disciplined and stay within established spending limits.
When setting one up a licenced insolvency practitioner will work with you to create a thorough budgeting system. This will account for all living costs essential to you, before calculating how much additional income can be turned towards repaying your debt. The aim here is for you to maintain a reasonable measure of living whilst being able to repay debt.
What are my essential Living Costs?
Housing Costs like a Mortgage or Rent
Household Bills such as gas, water and electricity
Food and home supplies
Transport Costs e.g. vehicles or the cost of public transport
Clothing and Hygienic care
Medical costs e.g. dental and prescription costs
Childcare expenses
It is worth noting that your designated IP will evaluate your financial situation each year to review any changes in your circumstances e.g. a pay-rise or inheritance. In this case there will be an expectancy on an increase in debt repayments.
What IVA works for me?
There are different options for IVA types based on different needs of individuals.
An interlocking IVA is beneficial for those who’s debt is jointly held with another e.g. a partner. It grants you the ability to take out separate IVA’s that are linked. This, however, needs to be discussed with your IP.
For those who are self-employed there is a Self-employed IVA. It allows for greater flexibility where monthly payments fall in line with fluctuations in income, while still ensuring the annual repayment terms are met. This type of IVA also permits you to prioritise certain creditors if repaying them entirely is essential to your ability to continue trading.
Eligibility Conditions:
- You must be a resident of England, Wales or Northan Ireland
- Your debts must amount to at least £6,000
- You owe to two plus creditors
An IVA can be an appropriate resolution if you have a stable income but are struggling to manage debt repayments. It does require a sustained commitment to repaying on time and being clear with your IP throughout your time.
Upon successful completion of an IVA, it is important to continue using the financial budgeting habits formed during this time to avoid turning back into financial trouble. It is important to note that an IVA once marked ‘complete’ will stay on your credit file for six years and remain on the Individual Insolvency Register, which can be viewed online.
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