Individual Voluntary Arrangement (IVA)

What is an IVA?

An IVA allows you to combine unsecured debts into one affordable payment while freezing all interest and charges. You make this payment over an agreed period, after which any remaining debt is written off. Typically, 60 months (5 years) for tenants and 72 months (6 years) for homeowners.

It is a legal agreement between you and your creditors; this means you will be legally bound to the agreement. Your creditors are required by law to freeze interest and charges.

If approved, the benefits of an IVA are:

• One monthly payment over an agreed period, so you know when you will be debt-free, typically 60 months (5 years) for tenants and 72 months (6 years) for homeowners.
• Any remaining debt at the end of the agreed IVA period is legally written off.
• It is affordable. Your monthly IVA payment will depend on your specific income and expenditure.
• Your creditors can no longer contact you about your debts, so an IVA stops phone calls, text messages, and demand letters.
• Legal protection – your creditors cannot pursue the debt any further, including debt collectors, bailiffs, attachment of earnings, or a deduction of benefits.
• Partners: You can do a joint IVA if a partner struggles with debt repayments.
• Vehicles are protected within an IVA as they are considered essential living items. All necessary items, such as your home, vehicle, mobile phones, etc., can be protected.
• Creditors can agree to an IVA if you are a homeowner or tenant.

Considerations:

• You are not guaranteed approval; most of your voting creditors by debt amount must agree to your proposed IVA.
• An IVA is a formal agreement, so you must maintain the payments whilst on an IVA; otherwise, your IVA can fail – allowances can be made for a sudden drop in income for periods of unemployment or being unwell.
• It will affect your credit score – an IVA will remain on your credit file for six years from the date your creditors agree to the IVA. If your IVA term is five years, it will stay on your credit file for 12 months at the end of your IVA.
• With no maximum debt, you must owe at least £7,200 to enter an IVA. If you owe less than £7,200, you may qualify for other debt solutions.
• The insolvency practitioner who administers the IVA for you and your creditors will charge fees. Your creditors agree upon these fees at the outset, and they are deducted from your monthly IVA payment. There are no set-up fees, and you do not pay anything besides your monthly IVA payment contribution.
• The IVA is held on the insolvency register.
• If you are a homeowner, you may be asked to release equity in the home. If this is not possible due to your partner being unaware of your debt, you do not have enough equity in your property, or you cannot get a re-mortgage, you will be asked to extend your IVA payment contributions over 6 years instead of 5 years. This does not apply to tenants.

Debts you can include in an IVA:

• Loans – Bank, personal or payday
• Credit cards
• Store cards
• Catalogues
• Overdrafts
• Utility – Gas, Electricity and water arrears from your current or past addresses.
• Council Tax arrears – from your current or past addresses.
• HMRC – Income tax and national insurance arrears
• Tax credit or benefit overpayments
• Debts to family and friends
• Business debts
• Other outstanding bills include solicitor’s costs, invoices for building work and vet’s bills.
• Any number of debts can be included, but normally, an IVA will be suitable if you have more than one creditor.

Debts you cannot include in an IVA:

• Maintenance arrears that a court has ordered
• Child support arrears
• Student loans
• Magistrates’ court fines
• Social Fund loans
• TV licence arrears

How do we help you take back control?

• First, you will need to complete our online form.
• You will then be contacted by a member of our specialist IVA team, who will complete an in-depth, confidential assessment of your financial situation. They will gather information about your creditors and finances and determine how much you can afford to pay your unsecured creditors each month, ensuring you have enough to cover all your other household costs.
• Our IVA Specialist will then review your eligibility for an IVA and discuss all the options available and the consequences of entering an IVA, allowing you to make an informed decision about how you wish to proceed.
• If you are eligible for and wish to proceed with an IVA, the next step is to produce your proposal document. The Proposal document is produced by an Insolvency Practitioner on your behalf, who will then supervise the IVA for its full term. Your Proposal contains a breakdown of your financial situation and details what you offer to pay your creditors monthly, usually for 5 – 6 years. It also contains the terms and conditions of the arrangement and your responsibilities to ensure the successful completion of the IVA.
• Once the Proposal has been drafted, it is sent to you for approval. Once you have signed and returned it, the Proposal is submitted to your creditors, who can vote on whether they wish to approve the IVA. Your IVA is approved if enough of your creditors vote to accept (for an acceptance, we require at least 75% by value of your unsecured debt to vote to accept).
• Once the IVA has been approved, we will work with you to ensure that your IVA runs smoothly. In the IVA, your circumstances will be reviewed annually to ensure the repayment plan is affordable using nationally recognised spending guidelines.
• If you find that you struggle with your payments or have had a change in circumstances or even an unexpected bill, if you make us aware and keep in contact, we can help ensure that your IVA still has the best possible chance to succeed.
• Upon the successful completion of the IVA, any remaining debt and the accrued interest and charges are written off.
• As with any formal debt solution (Bankruptcy or Debt Relief Order), your credit rating will be affected six years from the start date, and your name will be added to a Public Register (the Individual Insolvency Register). If you come into any money during the term of the IVA, e.g., an inheritance, lottery win, pay rise or bonus, you may have to pay a proportion of the funds received towards your debt.
• If you own your property, you may be required to free up any equity in your property by way of a remortgage to pay towards your debts; – remortgage whilst on an IVA is likely to be on less favourable terms than your current mortgage. However, if you cannot remortgage, the IVA could be extended by up to 12 months.
• You must keep up with your repayment plan. If your IVA fails, you could be at risk of Bankruptcy.

While you are in an IVA, you must:

• Make the agreed payments – usually a monthly or lump sum payment.
• Let your IVA provider know if your income increases or if you receive any additional income.
• Not take out any new credit without permission, for example, loans.
• You can include any amount of debt in your IVA. There are no minimum or maximum limits. The fees for an IVA are high, so if your total debt is less than £10,000, an IVA might not be the best option.
• If you do not have a lump sum of money or regular amounts to pay into an IVA, you should check other options for getting out of debt.
• A qualified person must set up an IVA, called an insolvency practitioner. The insolvency practitioner will charge fees for the IVA.

How the repayments work:

• If you decide to get an IVA, you will work out a repayment plan with the insolvency practitioner. This could be monthly payments, a lump sum, or a combination.
• The repayment plan should be based on an amount you can afford.
• The IVA usually lasts 5 or 6 years if you make monthly payments.
• You will make your payments to the insolvency practitioner. They will keep some of this to pay their fees and split the rest between your creditors.
• The insolvency practitioner will review your situation yearly on an IVA.
• If your income changes, your IVA payments might change. For example, if you get a pay rise at work, you will be expected to pay more into your IVA.

If you receive a lump sum of money.

If you receive a windfall during your IVA, for example, an inheritance, this will usually be taken and paid to your creditors. If you find out that you are due some money because of something that happened before the IVA, your creditors might have the right to claim it, too – even if your IVA has finished.

Fees

Our initial advice is free; however, fees will apply if you decide to enter an IVA. These are not upfront costs; they are paid out of (not on top of) the agreed monthly payment and will be discussed in detail by your IVA specialist before you decide to proceed with the IVA. We will always be completely honest and transparent about the fees charged and what these fees are for.

If an IVA is recommended as a suitable solution for you, and you decide to proceed, the Insolvency Practitioner will conduct a comprehensive review of your financial circumstances and submit your case to the Insolvency Practitioner. No fee is charged for this service.

There are two types of fees charged by the Insolvency Practitioner. During the initial set-up period, the Insolvency Practitioner acts in an advisory capacity as your ‘Nominee’. Once the IVA is approved, the Insolvency Practitioner becomes your ‘Supervisor’.

Nominees Fee

This is a fixed fee for the advice stage and preparation of the Proposal and all other necessary documents, including the calling of a meeting of creditors. The fees charged are based on the standard charges of this company and are in line with our competitors. The Nominees fee is paid from the monthly payment agreed in your Proposal.

Supervisors Fee

An Insolvency Practitioner proposes a fixed Supervisor fee, usually £1,750, spread over the IVA duration. These fees cover all of the work done after the Proposal is approved for the ongoing supervision of the IVA and payment to your creditors until the IVA is concluded. Creditors may change how we charge our fees. You can refer to the Guide to Fees here for further information. The Supervisor’s fee is paid from the agreed-upon payment in your Proposal.

The Nominee and Supervisor will charge expenses incurred with the IVA, including postage, photocopying, stationery and telephone costs. In addition, expenses will be payable to third parties on costs such as bonding, software fees, courier fees and registration of the IVA.