An Individual Voluntary Arrangement (IVA) is a legally binding contract between an individual and their creditors. They were introduced by the government as part of the Insolvency Act of 1986. It enables those in debt (debtors) to make an arrangement with the people they owe the money to (creditors).
The debtors provide their creditors with a proposal to pay a monthly sum that they can reasonably afford, usually for five years, however bespoke arrangements can be designed to suit your circumstances. If the IVA proposal is accepted by the creditors it provides a legally binding contract and prevents further action against the debtor.
IVAs are often referred to as a flexible alternative to bankruptcy as they can provide a better result for all parties. To qualify for an IVA you must have unsecured debts of at least £15,000, owed to at least three creditors and you or your partner must have a regular source of income.
In summary:
- An IVA is a legally binding agreement with your creditors
- It is an agreement to pay back what you can afford, usually over five years
- Providing 75% of your Creditors by value agree to the terms, the IVA is approved and your creditors will take the agreed percentage of what is owed to them with the outstanding amount being written off
- Once an IVA is agreed your creditors will usually freeze all interest and charges
- You only make one monthly, affordable payment
- Once you have successfully completed the IVA, the balance of the debt is cleared
- The costs of running the trust deed are met from your contributions/assets. You do not pay any extra charges
- Any assets you have, such as equity in your home, would pass to the Trustee. In practice, however, a home rarely has to be sold as alternative arrangements can usually be made
- A motor vehicle can be retained provided it is required to go to and from work
- You are allowed to retain all essential household items