What Is An IVA?
Individual Voluntary Arrangement (IVA)
If you are unable to pay your debts in full, then you can propose an IVA with your unsecured creditors.
The result is you pay what you can afford, usually for 5 years, then all the outstanding debt is written-off.
An IVA is an agreement to pay a sum of money into a single arrangement for the benefit of unsecured creditors, i.e. those who do not hold security over any assets and could result in up to 75% of debts being written off.
Once an IVA has been approved no unsecured creditor can take any further action to recover their money outside of what has been agreed in the IVA.
A typical IVA could include an offer to pay a: -
- Lump sum of money, possibly obtained from a re-mortgage;
- Monthly payment from disposable income, for between 3 and 5 years; or
- Combination of the above.
If 75% in value of unsecured creditors who vote agree to the IVA, then they are all bound by it.
For individuals who are unable to pay their debts in full this is often an acceptable alternative to Bankruptcy.
An Insolvency Practitioner (IP), who is regulated and holds a license from their governing body, must agree that the IVA is fair to both the individual proposing the IVA and their creditors. The IP will become the supervisor of the IVA on its approval and will be responsible for ensuring that it is implemented as agreed.
Typical people entering into an IVA
Allows business people to continue in their trade where Bankruptcy would otherwise have prevented them.
Professionals whose employment would be jeopardized by Bankrupcy.
Individuals with assets to protect, such as their home.
Someone with debts over £18,000 and is able to make a lump sum payment or monthly contributions for 3 to 5 years and wishes to avoid Bankruptcy.
