Individual Voluntary Arrangements (IVA) in brief

An IVA replaces all previous agreements held with all of your unsecured creditors. It is a formal contract that legally binds all your creditors to one new affordable monthly payment. An IVA is supervised by an Insolvency Practitioner and is intended as an alternative to Bankruptcy. An IVA, unlike bankruptcy is not mentioned in the press.

An IVA normally lasts for a period of up to 60 months. During this time you will make monthly payments, which are then paid to your creditors, through your Insolvency Practitioner. These monthly payments are based on your ability to afford them and are paid to your creditors on a pro rata basis. They are taken from your disposable income, which is the balance between what you earn and your essential living costs.

The payment is calculated by your insolvency Practitioner and put to the creditors in an IVA proposal, which is presented at an IVA Creditors Meeting. The creditors are then required to vote on your IVA proposal.  This vote does not need to be unanimous. Of the creditors that actually vote, if more than 75% in debt value terms,  choose to accept the IVA proposal, the IVA is approved and becomes legally binding on all creditors whether they voted or not.

When the IVA is approved all interest charges on the debts are frozen. The creditors also give an undertaking to stop demanding payment by phone and by letter and agree to accept IVA payments through the Insolvency Practitioner.

You are then required to make the agreed monthly IVA contribution to the Insolvency Practitioner for the term of the IVA. At the end of the IVA any remaining debt still unpaid is cancelled and considered to be paid in full. 

If you own a property but are unable to release enough equity to clear your debt in full an IVA is still an option but any equity available at the end of your IVA may have to be released to offset any remaining debt.