WHAT IS AN IVA

An IVA is an Individual Voluntary Arrangement. IVAs were introduced by the 1986 Insolvency Act, and offer people with debt problems an alternative to bankruptcy or to taking out expensive debt consolidation loans.

An IVA is a formal and legally binding agreement between you and the people or companies you owe money to (your creditors).

To set up an IVA, you will need the help of a licensed insolvency practitioner, like the ones we work with at Divadani Finance.

With the insolvency practitioner’s help, a proposal is put to all your creditors giving details of what you owe, your financial situation, your personal circumstances, and how you plan to repay the debt.

Your creditors then hold a meeting where they consider the IVA proposal and vote on whether or not to accept it. If at least 75% of the vote is in favour, then the IVA is accepted and from that point on it becomes legally binding on all the creditors (even any who may have voted against it).

Once the IVA is established, you make monthly payments into a fund over a five year period. After that time, so long as you have made all the monthly payments, the debt is cleared – even if that means your creditors get less than 30% of the debt repaid.

The monthly payments into the fund are overseen by the insolvency practitioner. The fund is used to pay your creditors, and these payments from the fund are also supervised by the insolvency practitioner. Money from the fund is also used to pay the insolvency practitioner’s fees – which is why you don’t have to pay any upfront fees to set up the IVA in the first place.

Monthly payments into an IVA are based on affordability and so can be as low as £250 per month, but are typically around £300 to £400. But even that is likely to be a lot less than you are currently being expected to pay for your various debts.

During the period of the IVA, your creditors are required to freeze all interest on your debts, and they are also prevented from chasing you for additional payments or pursuing any legal action against you.

So, not only does an IVA allow you to write off a large proportion of your debts, but it also removes the stress caused by creditors phoning you or writing to you to chase payment of your debts.

To apply for an IVA, you usually need to have a minimum level of unsecured debts of £15,000. This excludes money owed on hire purchase agreements, secured debts such as your mortgage, and debts in respect of fines, fraud or overdue child support payments. But an IVA can include money owed to banks, finance companies, credit card companies, HM Revenue & Customs, or the Student Loan Company.

In addition, before you can apply for an IVA, you’ll generally need to owe money to at least three creditors, and be employed with a household income of at least £1000 per month.

To find out if an IVA may be the answer to your debt problems, please complete our no-obligation enquiry form and we will arrange for a debt adviser to contact you for a confidential discussion.