What is an Individual Voluntary Arrangement (IVA)?

Find out more about an IVA, who it is for, who it is not for, what it does the pros and cons

An Individual Voluntary Arrangement, or IVA, is a form of insolvency, and it can be a good way of repaying your debts at a rate that you can afford. An IVA shows your creditors that you’re insolvent. In other words, you can’t repay your debts in a reasonable amount of time, but there’s no expectation that you’ll have to sell your home, and you might not have to sell any of your assets or items of value, such as a car if you have one. To be eligible for an IVA, you need to show that you don’t have enough money to pay your normal monthly debt repayments and that the amount of debt that you have is more than any assets and equity you have in your home. Instead, once you’re on an IVA, you’ll make monthly payments for five or six years.

There’s also something called a one-off lump sum IVA, where you make a one-off payment. You can find out more about these by contacting us and speaking with the team. For an IVA to go ahead, 75% of your creditors need to agree to the proposal. This works on a value basis. So, for example, if you owe 50% of your debt to one creditor, then their share of the vote is 50%.

IVAS are only available in England, Wales, and Northern Ireland. If you live in Scotland, we’d suggest looking at some of the alternative options, including some solutions that are specific to people living in Scotland. So, let’s go through some of the benefits and risks of a standard IVA. When it’s approved, an IVA gives you protection from your creditors. They’ll stop contacting you, and they won’t add any more interest or charges to any debts that are included in it.

At the end of the IVA, any money left to pay on the debts included in your IVA will be written off as long as you’ve made the payments that you agreed to. However, it’s important for you to understand the risks that you’ll need to consider before taking out an IVA. IVAS is a form of insolvency. They’re legally binding and they must be arranged through an insolvency practitioner.

The budget you agree with your insolvency practitioner should be affordable for the full term of the IVA. However, if your financial circumstances change, the IVA can be adapted. If you go on an IVA, a reference to it will be added to your credit file. This will stay on your record for six years and will make it more difficult for you to get further credit during your IVA. During the IVA, you’ll need permission to take out any credit over £500.

This is important to remember as if you do this without getting permission, your IVA could be cancelled. It also applies to borrowing money from family and friends. Additionally, your name will be added to an Insolvency register. This can be read online if someone looks for it, but it’s unlikely that you would stumble across it, and it shouldn’t appear in online search results for your name. If you’re a homeowner, you may also need to release equity through a remortgage.

If you can do this, your IVA will probably last for a total of five years. If you’re unable to do this, it’s likely that you’ll need to make another year’s payments instead. There is a risk that if your IVA fails for any reason, you could be made bankrupt. There are also fees involved with setting up an IVA. These are included in the amount that you pay.

This means that there aren’t any upfront costs, and if your Iva isn’t approved, then you won’t have to pay any fees at all. And finally, it’s very important to get expert debt advice to make sure that an IVA is suitable for you and your individual circumstances. We offer free debt advice both online and over the phone. We’ll help you put together a realistic budget and then recommend the most suitable debt solution for you. If an IVA is a solution that’s appropriate for your situation, we’ll set it up for you and be here to support you every step of the way.

Ready to get advice on an IVA?

Your Expert Group, scottishtrustdeed.help, River Insolvency,  ivahelper.co.uk are trading names of YEG Insolvency Limited which is Authorised Representative (FCA Number 987650) of Secure Financial Management Limited which is regulated by the Financial Conduct Authority.

Free and impartial help with money –  MoneyHelper.

May not be suitable in all circumstances. Fees apply. Your credit rating may be affected.

Secure Financial Management Limited’s FCA number is 550186. You can confirm this by checking the financial services register by visiting the FCA website www.FCA.org.uk?register or by contacting the FCA on 0800 111 6768. The registered office is 89 West Regent Street, Glasgow, G2 2BA. Registered in Scotland company no: SC393839. Registered with the ICO under the Data Protection Number ZA328512

Donna Forey is Licensed to Act as an Insolvency Practitioner in the United Kingdom by the Institute of Chartered Accountants of Scotland.

A formal debt solution may not be suitable in all circumstances. Fees apply. Your credit rating may be affected. 

*Debt examples are subject to creditor acceptance, payments are subject to individual circumstances, credit may be affected. Fees may apply.