- 1 Individual voluntary arrangements. Is an IVA a good fit?
- 2 What Does “IVA” Stand For?
- 3 What Is The Definition Of An IVA?
- 4 Advantages Of An IVA – The Pros
- 5 Disadvantages Of An IVA – The Cons
- 6 Rules For Creditors During An IVA:
- 7 Can Creditors’ Change The Terms Of The Agreement During The IVA?
- 8 Can Creditors’ Proceed With Legal Action During An IVA?
- 9 Is Any Interest And Charges Frozen During An IVA?
- 10 Are IVA’s Government Backed As A Debt Solution?
- 11 How Long Does An IVA Last?
- 12 Will An IVA Help Me? How Do I Know If It Will Help?
Individual voluntary arrangements. Is an IVA a good fit?
An individual voluntary arrangement (IVA) is a formal agreement to repay your creditors at an amount you can afford, usually a period of time over 60 months. An IVA is a form of personal insolvency that writes off a portion of your debt (often a very large portion of your debt).
IVA’s can also be a one-off payment known (lump sum IVA), but this is unusual or over a longer period to spread your personal repayments. It’s a way to make affordable repayments on your outstanding debts and also prevents creditor and bailiff hassle whilst you are participating in the IVA.
Once the IVA is completed, the debt is generally classed as repaid.
If you live in Scotland, the equivalent debt solution is the “trust deed” which is similar to an IVA. (this is a debt solution exclusively for Scottish residents and the Individual Voluntary Arrangement applies exclusively to UK residents).
What Does “IVA” Stand For?
The term “IVA” stands for “Individual Voluntary Arrangement”, it is a name for a debt solution that addresses personal insolvency issues to help you become debt free, a system of debt relief without having to take out further loans or credit in order to “consolidate” or your debts more manageable.
It is a debt solution where you will be assigned an insolvency practitioner (not to be confused with an official receiver, where a deal is worked out to make your monthly payments, are greatly reduced for the ful term of the iva (there are some people making monthly payments as little as £80 per month).
What Is The Definition Of An IVA?
An IVA is a formal debt arrangement that enables people to make contributions (repayments to their existing debts) over a period of time (generally 60 months) after which period (provided the plan has been adhered to and the monthly payments have been consistently made), the debts can be classed as settled, (and generally a sizeable portion of debt is written off).
An IVA is different to debt management, as a debt management plan has much less power to benefit your financial situation than an IVA.
Below we explain some of the “Pros & Cons Of An IVA”.
Advantages Of An IVA – The Pros
(1) An IVA is a way to freeze interest and charges on your existing debts and stop creditors hassling you for debt repayment.
(2) Large portions of debt can be written off with an IVA, provided you stick to the terms of the arrangement.
(3) Is considered an alternative to bankruptcy, which enables people to avoid the unpleasant side-effects and implications of going bankrupt.
(4) Can help you to make your debts more manageable in order to be able to ensure continuity of mortgage repayments and other high priority financial obligations.
(5) As long as you keep up with your monthly contributions towards your IVA, creditors cannot take legal action against you.
(6) Entering into an IVA can protect your personal assets, as long as you stick to the arrangement.
(7) You can have all of your unsecured debts and unsecured creditors included in an iva and there is no need for any further consolidation loans because an iva can deal with any amount of debt and any level of financial difficulties without takeing out any further personal loans.
(8) The IVA is designed to help you pay off your debts with greatly reduced consolidated repayments, and also in time write off your debts to completely change your financial situation..
Disadvantages Of An IVA – The Cons
(1) It is very important to keep up with your IVA contributions however concessions may be possible to meet with changes to your personal circumstances, personal assets could be put at risk.
(2) IVA’s generally run for 5 years, whilst bankruptcy only lasts for three years (but bankruptcy doesn’t protect personal assets).
(3) If you don’t stick to the IVA arrangement (IVA protocol), you could end up bankrupt.
Rules For Creditors During An IVA:
Are Creditors Able To Change Their Minds’ Once The IVA Has Been Agreed?
No, once the arrangement has passed through the “creditors’ meeting” the arrangement is set and the creditors’ agree to be bound legally by the terms of the IVA (Individual Voluntary Arrangement).
Can Creditors’ Change The Terms Of The Agreement During The IVA?
As long as you stick to the terms of the arrangement, there is no way the creditors can change the terms of the arrangement (they cannot demand more money from you in repayments or anything else that would change the existing arrangement).
One of the key advantages of an IVA is the fact that it is legally binding and therefore all creditors within the IVA agree to be bound by the terms of it, giving you peace of mind that the creditors’ cannot change the rules halfway through the process.
Can Creditors’ Proceed With Legal Action During An IVA?
Once agreed, there can be no further court action from your creditors. (This includes any bailiff action or CCJ action).
Any existing action would be managed by either the Nominee or the Adviser who would write to both the court and your creditors if there is existing legal action being taken out on you, any further court fines should be frozen, this contact would inform them that you are now in the IVA and this would halt legal action.
Is Any Interest And Charges Frozen During An IVA?
Once the IVA is agreed, normally your interest and charges (future interest and charges) become frozen from the point of agreement. Once the IVA is agreed these are generally frozen.
This is another prominent advantage of having an IVA.
Are IVA’s Government Backed As A Debt Solution?
The Individual Voluntary Arrangement (IVA) as a debt solution was established and administered by the Insolvency Act of 1986, and is presented to the creditors through an insolvency practitioner (the intermediary), as a formal repayment proposal.
The Insolvency Act 1986 is an act of parliament and thus as a debt solution the IVA is recognized and government supported and legally binding (provided the terms are sticked to by the person in debt). This act of 1986 enables the IVA to be a system of debt settlement whereby the amount of debt repayable each month is heavily dependent on the amount of disposable income, the individual has and their individual circumstances from the moment the iva is written and approved.
How Long Does An IVA Last?
These arrangements typically last for a time period of 5 years, however if personal circumstances improve they can be settled faster than that with no applicable penalties or charges or anything of that nature (unlike certain types of loan agreements).
After the 5 year time period the debt is generally considered to be settled and any remaining debt is generally written off. The IVA is considered one of the most powerful government supported debt settlement schemes.
Will An IVA Help Me? How Do I Know If It Will Help?
If you look above to the “Pros and cons” of an IVA this illustrates how IVA’s can be of benefit to you, as a system of debt relief.
If you have debts in excess of £5,000 and 2 or more companies’(you generally need to owe at lease this amount of debt) you owe money to (your creditors) then an IVA could be of a significant benefit to you offering a mixture of benefits including the following:
(1) Protection Of Assets
(2) Protection From Legal Action From Creditors
(3) Manageable Monthly Debt Repayments – No More Paying What You Can’t Afford
(4) Avoidance Of Bankruptcy (working with an insolvency practitioner, as opposed to an official receiver)
(5) Peace Of Mind From A Legally Binding Government Supported Debt Solution.
If you are in a position where your debts are unmanageable and the interest and arrears and/or other charges are spiraling out of control, an IVA has benefits that could be helpful for you. Many 10,000s of individuals accross Britain have turned to the individual voluntary arrangement as a debt solution and it has not only helped them in the short term (by making their debts more manageable) but it’s helped them in the longer term (by writing off their excess debt and enabling them to become debt free).
Will I Be Credit Checked Before Entering Into An IVA?
No because you are not taking out any further credit, credit checks tend to apply for loans and mortgages and other forms of procuring credit.
No credit checking will be necessary during any stage of initiation of this particular debt solution as no further credit would be taken out as a part of the process. (we would also advise anyone on an IVA in the early stage to avoid loans or additional credit of any type).
If you would like to know more about IVA’s or apply for an IVA, contact us using the form to the upper right hand side of the page for further assistance.
Our agents upon investigation of your individual circumstances should be able to tell you if you are eligible for an iva, there is no need for you to suffer with financial difficulties.
Other Relevant Questions: