IVA is short for Individual Voluntary Arrangement and is one way that you can manage a debt that you’re struggling to repay and avoid falling further behind with payments.
Available in England, Wales, and Northern Ireland, individual voluntary arrangements allow you to make regular payments to cover all or part of your debts. Typically, these are made monthly for between five and six years and are based on the amount you can reasonably afford to pay without wiping out all your disposable income.
Not only can an IVA help you manage your debt, but they can also offer more control than bankruptcy and allow you to continue running a business if you own one. And, once you’ve entered one, an IVA will legally protect you from being pursued by your creditors.
To be eligible for an IVA, you must have a regular income, unsecured debts typically over £5,000, and be unable to repay your debts in full. You must also be able to afford regular payments to your creditors.
An IVA involves making regular payments to an insolvency practitioner, who distributes the funds to your creditors. Creditors must agree to the IVA proposal, and if accepted, it becomes legally binding. During the IVA, creditors cannot take legal action against you.
IVAs generally cover unsecured debts such as credit cards, personal loans, overdrafts, and store cards. Secured debts like mortgages and car loans are not included. Some debts, like student loans and court fines, are also excluded.
Advantages of an IVA include a single, affordable monthly payment, protection from legal action by creditors, and the potential to write off a significant portion of your debts. It also provides a structured path to becoming debt-free.
Disadvantages include a potential negative impact on your credit rating, restrictions on your financial affairs, and the possibility of losing certain assets. An IVA may also affect your ability to obtain credit in the future.
An IVA typically lasts for five years, though it can sometimes be extended if the debtor’s financial situation requires it. After the agreed period and completion of payments, any remaining debts are usually written off.
Some professions, particularly those in finance or positions of trust, may have restrictions regarding IVAs. It’s essential to check with your employer or professional body to understand any potential impacts on your employment.
Missing a payment can jeopardize your IVA. If you’re unable to make a payment, contact your insolvency practitioner immediately to discuss your situation. They may be able to negotiate a temporary adjustment with your creditors.
Upon successfully completing an IVA, you’ll receive a certificate of completion. This signifies that you have met your obligations under the IVA, and any remaining eligible debts will be written off. Your credit file will reflect the completion of the IVA, which can aid in rebuilding your credit score over time.
Lucy Novo Deakin is a licensed insolvency practitioner in the UK by the Insolvency Practitioners Association (IPA).
My Debt Plan Ltd provides insolvency solutions to individuals, specialising in IVA’s. All advice given is provided in reasonable contemplation of an insolvency appointment. Where you are not suitable for an IVA, we may refer you to one of our trusted partners who specialise on alternative solutions, and as such we will receive payment for the introduction if you enter into a debt solution with one of our partner companies.
Registered address 2nd Floor Blenheim Court, Cheadle, Cheshire, England, SK8 2JY Company Registered in England and Wales Number 10992838 Data Protection ZB284067.
To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.
*Our advice on your options is always free. We will always notify you if a solution you choose has any cost.
**Of 2,381 IVA cases approved between January-December 2023, the average expected write off assuming successful completion is 74%.
A debt write off amount between 25% and 75% is realistic, however, the debt write off amount will differ for each customer upon their individual financial circumstances and is subject to approval of their creditors. Any remaining qualifying unsecured debt in your IVA will be written off, however some unsecured debts will be excluded, such as court fines, child maintenance and student loans, therefore you will need to continue paying these both during and after the IVA.
