What is an Individual Voluntary Arrangement or IVA.
An Individual Voluntary Arrangement is a contract between you whoever you owe money to, -- you creditors. You pay an agreed monthly amount, almost certainly for 5 years to your Supervisor, a Licensed Insolvency Practitioner of your choice. The Supervisor takes his fees from the fund and pays the balance to your creditors in proportion to the amount of their debt. If the payments are made on time as per the agreement, the debts are deemed to be settled in full and final settlement of all claims.
What Monthly Amount will I be required to pay?
The monthly payment varies depending on your income and expenditure, and will only be agreed if it is realistic and affordable. You will be required to submit a detailed income and expenditure statement each year, and if you are deemed to be able to afford to pay more, the amount will be increased. If you cannot afford to keep up with payments, you may be deemed to be in default, and be made Bankrupt as a result. It may be possible to vary the IVA with the consent of creditors to avoid the IVA being failed and you being made Bankrupt.
Are there any other options?
You could contact your creditors yourself, in writing, and negotiate a payment plan with each one separately. This is worth trying where your debts are lower than the IVA debt cut-off level of £15,000. Some banks and building societies have debt counsellors, and may be the best point of contact when looking to agree a payment plan. The downside is that any agreement is not legally binding, unlike an IVA. One or more of your creditors could change their mind at a later date, or charge you higher rates of interest later if your circumstances improve.
What are the advantages of an IVA?
- You make one payment to your Supervisor by direct debit each month.
- When your IVA is approved, all of your creditors are legally bound by its terms, as long as you keep to your side of the agreement, by paying your agreed monthly sum and complying with any additional conditions such as realising the equity in your house in the final year of the IVA.
- Once the agreed term of your Individual Voluntary Arrangement is over (almost always 5 years for payment plan IVA?s) your debts are settled, legally speaking in full and final settlement.
- Your employment should not be impacted. There is no legal requirement to inform your employer, there is no advertising of your IVA, although it will show up on a credit check.
- Your employer will therefore only find out about your IVA if you choose to discuss with anyone at work.
- Unlike bankruptcy, your details will not be advertised in the local press and you are able to act as a Director of a Limited Company. Professionals who would lose the ability to practice or who may lose their jobs if made Bankrupt, can use the IVA to recover their financial position and maintain their professional career and income.