IVAs

Individual Voluntary Arrangements - Debts.org.uk

Pay what you can afford for 60 months and write off the remaining debt

An Individual Voluntary Arrangement (IVA) is a legally-binding agreement between you and your unsecured creditors, such as credit card companies and payday loan providers. It may be an option if can no longer afford your repayments.

With an IVA, you pay your creditors as much as you can afford over a set time period, usually five years. During this time, you’ll have the reassurance of legal protection from the creditors bound by the IVA terms, as they can’t pursue you. An IVA is a composition of a full and final settlement of your debt and once you have complied with the terms of your IVA Proposal, the debt bound by the IVA will be written off.

If an IVA is suitable for you and you comply with its terms, it can be an effective way of managing your unsecured debts without resorting to bankruptcy. In most cases, you can keep your home and any reasonable assets, such as a car so you get to work. However, you must be willing to enter into a formal agreement with your creditors, and be able to make regular payments from your disposable income.

How an IVA works

An IVA can only be set up and supervised by a licensed Insolvency Practitioner (IP). Here at Debts.org.uk, we’ll refer you to one of their fully-qualified IPs.

Here’s what will happen next:

  • Your IP will put together a Proposal.  They will determine your disposable income, based on your income and expenses. The Proposal must be affordable for you and fair to your creditors.
  • The Proposal is then sent to your creditors and your IP arranges a meeting for them to vote on  the Proposal. This is called a ‘creditors’ meeting’.
  • If at least 75% (by debt value) of your creditors agree to the Proposal, then your IVA  will commence from this date. From this time, you and your creditors are legally-bound by it.
  • You will be required make payments to your IP as set out in your Proposal, typically, this will be monthly payments.  Your IP will make distributions to your creditors in accordance with the terms of your Proposal.
  • If your personal circumstances (especially your income, expenses or assets) change during the term IVA, you must inform your IP urgently. They may be able to vary the IVA terms and change your payment amounts, however your creditors must agree to this variation.

Example of how an IVA works

John can afford to pay £400 a month and his total unsecured debt is £60,000

His IVA terms will be 5 years and he will pay towards his IVA £24,000

After the approved IP fees of £4,000 has been deducted, £20,000 will be distributed to his creditors

Therefore, the remaining £40,000 of John’s unsecured debt (66%) will be written off

Here at Debts.org.uk, we have a panel of IVA providers. If you think that an IVA is the best solution for you we will refer you one of the fully qualified Insolvency Practitioners on our panel.

 

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