A common question asked is “what is an IVA” or “What does IVA stand for”? An IVA is just one of many debt solutions available to people struggling with the burden of unsecured debt, such as credit cards, payday loans, overdrafts or personal loans, among other forms of credit.

An IVA stands for an Individual Voluntary Arrangement.

An IVA is a form of insolvency, which is a formal route to become debt free. A formal debt solution will enable you to pay one monthly payment towards your debt and if you complete the debt solution you will become debt free at the end, with any remaining debt, interest and charges written off.

Take Care with an IVA

The IVA option can be a very efficient method to become debt free again, should it be appropriate for you. It’s important to ensure you’re entering the right solution because the wrong debt solution can be detrimental to your credit file as well as the time you’re in the debt solution.

In the past, we’ve heard that some people use the letters IVA to try and describe other debt solutions, such as a debt management plan. A debt management plan lasts until all of the debt and any charges are repaid. So, in this scenario below you could be in a debt management plan for at least 11 years, whereas an IVA would be 5 years.

Unsecured debt: £40,000

Assets (like a house): £0

Disposable income: £300 per month

Tips to Ensure You’re Entering an IVA

If you’ve chosen your debt solution and want to enter an IVA there is some information which could help you ensure you’re entering an IVA and not a debt management plan. For example:

  • You need a licenced insolvency practitioner in order to enter an IVA. The Insolvency Practitioner (or IP) will propose your IVA on your behalf.
  • There will be a creditors meeting in an IVA to decide whether they want to accept your proposal.
  • Setting up an IVA takes at least 10 weeks, whereas a debt management plan is quicker.
  • Each insolvency practitioner must be registered with a regulatory body, such as ICAEW (Institute of Chartered Accountants England and Wales), so check which body your Insolvency practitioner is registered with.
  • An IVA is completed usually within 5 years, however in some instances it can be extended to 6 years. If your paperwork doesn’t state the expected date of completion, and doesn’t mention the words Individual Voluntary Arrangement, then get impartial advice before proceeding.