Individual Voluntary Arrangement
An individual voluntary arrangement (IVA) is an alternative to bankruptcy.
It is a formal arrangement to pay an agreed amount off your debts over a shorter period such as five years, or through raising a lump sum. The rest of the balance you owe on those debts which are included in the IVA is written off at the end of the IVA term. You will need to have a significant monthly income surplus to pay in to an IVA (or a lump sum), and because of the costs involved, it is more advantageous if you owe more than £10,000. An IVA can only be set up by an Insolvency Practitioner (IP) (Crosslight can make a referral if necessary).
Debt written off?
Any amounts remaining at the end of your IVA term will usually be written-off
Length of time?
Usually 5 or 6 years
*Is there a fee?
Some IP providers charge a non-refundable up-front fee to set up an IVA (although not the IP’s that Crosslight refer to). Some of the money you pay in to your IVA each month will be kept by the IP as a service fee.
Which debts are excluded?
Court fines, CSA obligations, student loans, secured debts, damages, personal injury, Social Fund crisis or budgeting loans, and fraud.
Impact on assets?
If you own your house, you may need to re-mortgage your home as part of the IVA. If you are unable to do this you may have to pay extra into the IVA, or in rare cases you may lose your home.
Impact on employment?
An IVA will usually have less of an effect on employment than bankruptcy. However in some professions your employment may still be affected by an IVA. You should always check with your professional body and/or your contract of employment.
Credit rating affected?
Yes, for 6 years
Am I eligible?
You owe debts to more than one creditor
Due to the costs, you should usually owe more than £10,000
You have a significant monthly surplus income (usually more than £100 a month) or a lump sum to enable your Insolvency Practitioner to negotiate acceptable terms of the IVA with your creditors
How do I apply?
Crosslight will refer you to an Insolvency Practitioner (IP) who will facilitate the IVA and who will not charge you any up-front fees. However, the IP will take a percentage of the monthly amount you pay the creditors to cover the cost of the IVA. The IP will negotiate the terms of the IVA with your creditors and prepare the proposal. Once you have entered into an IVA you will make one monthly payment to the IP who will administer and distribute it amongst your creditors.
What else do I need to know?
An IVA can only proceed if 75% of creditors (by amount of debt) agree to the IVA
If you rent your home, check the terms and conditions of your tenancy agreement. It may say that your landlord can end your tenancy if you enter into an IVA (although your landlord may choose not to do so if you are up to date with your rent payments)
If you paid an up-front fee for your IVA and it is not accepted, then you will have lost the fee and may be in a worse position than when you started
There is a risk that the IVA is agreed on the basis of monthly payments that you cannot afford over a long time. You must be very careful that the payments are set at a realistic amount in the first place
If your financial circumstances change and your IP cannot get the creditors to accept the amended terms, the IVA might fail. You will then still owe the creditors the full amount and may be made bankrupt
On completion of the IVA the balance of what you owe will be written off
The IVA will be listed in the public domain
Feeling overwhelmed by debt or money worries?
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