Individual voluntary arrangements

An Individual voluntary arrangement (IVA) can help you to avoid some of the disadvantages of bankruptcy. An IVA is a legal agreement with creditors (usually non-priority creditors) to repay your debts either in part or in full over a fixed period of time. It provides the debtor greater control over how assets are dealt with and helps to provide reassurance that no further debts will accrue.

If you have enough money left over in your personal budget after paying your priority creditors and essential expenses, you may be able to arrange an Individual Voluntary Arrangement (IVA).

The arrangement is negotiated, written up and checked regularly by an Insolvency Practitioner. Provided the creditors to whom you owe 75% of your debt agree, it is not necessary for all creditors to agree to an IVA.

The costs of setting up an IVA can be high, and you may have to pay an upfront fee. If you don’t keep to the payments, you can be made bankrupt. There are some providers whose services are free to the user, so be sure to consider this when choosing an IVA provider

Who should consider an IVA?

An IVA may be appropriate for someone with a regular income who has over borrowed or overcommitted themselves to credit and is seeking an alternative to bankruptcy.

What are the advantages of an IVA?

All interest and charges on any unsecured debts will be frozen.
Providing you keep to the terms of your arrangement an IVA will protect you from any further court action or other recovery action by your unsecured creditors.
You have the opportunity of a fresh start once the IVA has been successfully completed as your debts are effectively written off.
If you could lose your job as a result of bankruptcy or there are other reasons to avoid bankruptcy an IVA provides a preferable option.
Your payments in the IVA are based on your ability to pay.
Individual Voluntary Arrangements are not published in local newspapers,
It will not affect professions such as the Police Force and Armed Forces or prevent you from holding public office or acting as a company director.

What are the disadvantages of an IVA?

You will be required to live on a restricted budget for the term of the arrangement (usually five years).
You are expected to declare all assets and liabilities and creditors can ask that assets of excessive value be released to reduce your debts.
You will be asked to release some of the equity from your property towards the last six months of the arrangement.
Any windfalls, inheritance or bonuses must be declared to the Supervisor of the IVA.
IVA’s are recorded on a public register and are likely to appear on your credit file.

If you think that an IVA may be an option for you, you should get advice from an experienced adviser.