An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your creditors in which you agree to pay off your debts over a period of time. IVAs typically last between 5 and 6 years but may extend to longer if you haven’t fully paid off your debt.
I can access an IVA for debt control through an insolvency practitioner who can start the process of application. These are usually approved by the courts, so you have to make a firm commitment to these before you apply.
It’s important that you deal with a government approved Insolvency practitioner to avoid even further financial difficulty. To ensure the person you consult is reputable, use the government search tool.
How do I know if I’m eligible?
IVAS are not available to everyone. First of all, you must be a resident of the United Kingdom and have a minimum debt of £5,000. Other criteria include:
- Insolvency (your debt is greater than the value of your assets)
- Having a steady income
- Ability to pay at least £80 into the IVA
- A minimum of two creditors
- The IVA has a higher rate of return for your creditors than bankruptcy.
If you meet the majority of these criteria, then the chances are you will be approved for an IVA.
How to apply
To set up an IVA between you and your creditors, you should see an Insolvency Practitioner. These act on behalf of individuals facing financial trouble and aim to help you restore payments towards your debt.
Your insolvency practitioner will calculate how much you need to pay on a monthly basis. They will look at things such as your income, monthly expenses and assets to determine whether you qualify for an IVA and how you can best approach payments.
The IVA will begin if the creditors holding 75% of your debt agree to it. Even if one creditor disagrees with the scheme, the IVA still applies to them. An IVA prevents creditors from taking further action against you regarding your debts.
Costs
There are normally two fees associated with an IVA:
- A set up fee.
- A handling fee each time you make a payment.
Repayments are made directly through the insolvency practitioner, who distributes this among your different creditors. They usually keep a portion of this to pay their fees; insolvency practitioners will inform you of this up front.
What if I inherit money during an IVA?
If you come into money of any kind during the period of your IVA, such as an inheritance, then this is usually taken to repay your creditors.
Similarly, if you discover you are owed money because of an event before your IVA, then creditors can also claim this in some cases. The best course of action is to contact an Insolvency Practitioner or Citizens advice in this case, as creditors may still be able to claim this money if your IVA has ended.
