IVA (Individual Voluntary Arrangements) Help & Advice

Overview

An IVA is a formal, legally binding debt solution that allows people with serious debt problems to pay back a portion of what they owe over time, and write off the debt they can’t afford.

In this guide, we’ll explore exactly what an IVA is, how it works, the ways an IVA helps people pay off their unsecured debts, and whether an IVA is the best way for you to regain control of your financial situation.

An IVA is only available to residents in England, Wales and NI

What is an IVA

An Individual Voluntary Arrangement, or IVA, is a legally binding agreement between you and your creditors to repay a portion of your total unsecured debts over an extended period of time – usually around five or six years.

Available in England and Wales, an IVA allows you to pay towards your debts through a series of monthly payments based on your affordability. At the end of an IVA, any leftover debt will be written off, and you’ll be free of any debt covered by the arrangement.

How do Individual Voluntary Arrangements work?

An IVA is a debt management programme that is set up by an Insolvency Practitioner (IP). They are debt professionals who will help you devise a repayment plan, and will handle payments to your creditors throughout the process.

IVAs work by allowing you to repay your debts over time through a series of monthly payments. These payments will be divided among your creditors each month. As long as you maintain these payments, any unsecured debts you have left at the end of an IVA will be written off.

Do I qualify for an IVA?

IVAs are most effective for people who meet the following criteria:

  • They have unsecured debts of £6,000 or more
  • They owe money to two or more creditors
  • They live in England or Wales
  • They have a steady income that allows them to make regular monthly payments

If you want to know whether you qualify for an IVA that can write off up to 81% of your unsecured debt, you can find out here – it takes less than a minute to check.

How to set up an IVA

If you want to apply for an IVA, you should know what’s involved first. Thankfully, the IVA process is easier than you think.

Get advice on the debt solutions available to you

Before you think about applying for any sort of debt solution, you should make sure you get debt advice. There are various repayment programmes that can help you, but it all depends on your financial situation.

A debt advisor can offer you free advice and help you choose the best way forward for your individual circumstances.

Go through your unsecured debts with an Insolvency Practitioner (IP)

An IVA is set up by an Insolvency Practitioner. They will explore your debt level, as well as your income and expenditure, and help you draft a payment plan based on your affordability. They do charge fees for their services, but they will be taken as part of your overall monthly payment into the IVA.

Submit an IVA proposal to your creditors

Once your IP has helped you draft an IVA proposal, it will be shared with your creditors – the people you owe money to. As long as a majority of your creditors vote in favour of the proposal, your IVA will be approved.

Start making monthly payments towards your debts

Once your IVA has been approved, your monthly payments will start. The payments will be taken at the same time each month and they will be handled by your Insolvency Practitioner.

How we helped Paige

It was literally the best decision of my life, and it has actually changed my life, cheesy as that sounds, it has changed my life.

Paige , IVA Customer

What debts can be included in an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement can be used to help you repay most types of unsecured debt. The most common debts cleared by IVAs include:

  • Credit card debts
  • Payday loans
  • Personal loans
  • Unpaid overdrafts
  • Rent arrears
  • Gas and electricity arrears
  • Council tax arrears
  • National insurance arrears

 

Certain debts can’t be included in an IVA, like unpaid court fines, unpaid child support or child maintenance, and student loans in certain cases.

Can unsecured debts be included in an IVA?

It’s important to note that secured loans are not covered by IVAs. A secured debt is any debt secured by an asset, like your home or car.

If you have secured debts like a mortgage on your home, or a hire purchase agreement on your car, you will be expected to continue making payments.

How long does an IVA last?

Most IVAs take between five and six years to complete. If you’re a homeowner and a valuation shows you hold more than £5,000 of equity in the property, you will normally be required to release that equity towards your IVA. This allows you to complete your IVA after five years.

If you don’t own your own home, or you don’t hold enough equity in the property, your IVA will typically last six years rather than the usual five.

It is possible to pay off your IVA early. You can do this by offering a lump sum, known as a full and final settlement offer, to your creditors. If they accept, you’ll be free to leave your arrangement early.

What happens to my debts at the end of an IVA?

As long as you make your monthly payment on time each month, your Individual Voluntary Arrangement will come to an end after five or six years.

At the end of your payment term, any remaining unsecured debt will be written off by your creditors. This means you will no longer be legally responsible for the debt, and your creditors can’t chase you for repayment. You’re free to move on with your life.

Advantages & Disadvantages

Advantages

Write off up to 81% of your debt

No upfront fees

Offers creditor protection

Freezes interest and charges on your debts

Allows you to keep your home and other assets

Helps you avoid bankruptcy

Disadvantages

Places you under a strict budget

Doesn’t cover debts like secured debt, student loans, or court fines

Will be recorded on a public register

Will impact your credit rating

Missed payments can cause your IVA to fail

If your IVA fails, you could be made bankrupt

How will an IVA impact my life?

The main impact an IVA will have on your life is that you will be subject to financial restrictions for as long as the arrangement lasts.

When drafting your IVA proposal, your Insolvency Practitioner will work out how much money you need to cover your essential living costs. Any money you make over and above that should be paid towards your debts.

During your IVA, you won’t be able to borrow money totaling more than £500 without first getting the permission of your Insolvency Practitioner. The arrangement will also be listed on the Insolvency Register, a public record of all personal insolvencies in the UK, but this information is highly unlikely to be viewed by anyone other than lenders and credit reference companies.

How will an IVA affect my credit rating?

Your credit rating is a score given to you by credit reference agencies. It gives lenders an idea of how reliable you are at repaying money you have borrowed. The higher your credit rating is, the more trustworthy you will appear to lenders.

An IVA will remain on your credit file for six years from the date it began, and it will lower your credit rating temporarily. During that six-year period, you may find it more difficult to do things like take out a loan, be accepted for a mortgage, or open certain types of bank accounts.

Once your IVA is completed, that information will be shared with the credit reference agencies, and details of the arrangement will be removed from your credit history.

Where can I get more advice on IVAs and other debt solutions?

If you have a debt problem that only seems to get worse, it can be difficult to know how to turn your situation around, especially when there are so many debt solutions to choose from. That’s where we can help.

At Your Debt Expert, we specialise in the kind of debt solutions that have helped tens of thousands of people get out from under serious debt.

For free initial advice and guidance on how to tackle your debt, contact us today on 0800 082 8086.

Where can I get more advice on IVA (Individual Voluntary Arrangements) Help & Advice and other debt solutions?

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 082 8086 or click the button below to get started