An Individual Voluntary Arrangement, also known as an IVA is a debt solution for people based in England, Wales and Northern Ireland. The Scottish equivalent is a Trust Deed Scotland. An IVA can enable you to put a proposal to your creditors, which if accepted, will mean you only repay what you can afford.
To determine if an IVA is suitable you should first seek debt advice. You can receive not for profit advice from Debt Support Trust by telephoning today on 0800 085 0226.
An IVA is a regulated solution requiring an Insolvency Practitioner to administer the arrangement. You would make an affordable monthly repayment usually for 5 years. After which, any remaining debt will be cleared (as long as you have complied with the terms of your agreement). An IVA is an alternative solution to Bankruptcy.
Take the debt analyser today to find out if an IVA is suitable for you.
Benefits of an IVA
- Your IVA would be legally binding meaning no further charges or interest could be added. It also means your creditors are not able to change their mind if they agree to your proposal
- You will only be asked to make affordable repayments
- An IVA enables a professional person (doctor, accountant, solicitor etc) to continue to practice whilst resolving their debt problem. Bankruptcy may affect their professional status. You may have to check your employment contract to ensure you can enter an IVA
- You are likely to be able to keep your home within an IVA, usually the Insolvency Practitioner will only be interested in any equity
- You would face fewer restrictions entering an IVA compared to bankruptcy
Negatives of an IVA
- Any available equity in your house or other asset would be considered
- An IVA is legally binding so defaulting on the agreement would result in your IVA failing, which could mean your creditors will proceed with bankruptcy
- Your income and expenditure will be reviewed on a frequent basis which can mean your monthly contribution could fluctuate up as well as down
- Your IVA would be noted within your credit file. The default on your credit file will last for 6 years in total from the date it was applied
- An IVA usually lasts for 5 years, whereas Bankruptcy would only last for 1
year. An income payment order in Bankruptcy could last for 3 years
- A remortgage is likely to be on less favourable terms and if you are unable to gain a remortgage your IVA may be extended for up to 12 months
- An IVA will affect your credit rating for six years
Criteria to enter an IVA
- Unsecured debt must be £5,000 or over
- You must have a monthly disposable income which you can afford to pay towards your debts
- You must live in England, Wales or Northern Ireland
Fees associated to the IVA
An IVA is administered by a licensed Insolvency Practitioner and their team. An Insolvency Practitioner will receive a fee for acting as your nominee and supervisor. These fees are paid separately. The insolvency practitioner will also charge for additional expenses.
If an IVA is the correct debt solution for you and you wish to proceed, we can introduce you to one of our panel reviewed companies. If we help gather your documentation and complete the fact find pack to send to the insolvency practitioner we would be acting as their agent, completing work on the insolvency practitioner’s behalf. The fee we would receive from the insolvency practitioner is 50% of the nominee fee if your case was accepted at the creditors meeting.
The fees charged by the insolvency company are outlined below.
The nominee fee is paid to cover work carried out to put your proposal to your creditors. A licensed insolvency practitioner is required to review your IVA proposal prior to presenting it to your creditors. The insolvency practitioner will provide a report to advise whether they believe the IVA will be successful.
The nominee fee will cover this work and drafting your IVA proposal, collating information regarding your creditor claims and giving notice of and holding a meeting of creditors.
The insolvency practitioner will be paid the nominee fee from the first payments you make into your IVA. This means your creditors will not be paid immediately and your account will go into arrears. If your account was in arrears already then you will go further into arrears.
The supervisor’s fee will typically last for 5 years and cover the ongoing costs to maintain and support your IVA until it has concluded. This would involve completing annual reviews of your IVA, providing reports to your creditors, distributing payments to your creditors and resolving any issues that arise during your IVA as a result of your financial situation changing.
Each insolvency practitioner will have their own fee structure for an IVA and it is typically decided on a case by case basis depending on the complexity of the IVA.
Once your insolvency practitioner has made the proposal to your creditors, they will have to vote on the agreement, including the fee charged by the insolvency practitioner. 75% of the people voting at the meeting must approve it before it is accepted.
An example of fees charged by a licensed insolvency practitioner is below
- Nominee fee – £1,250
- Supervisor fee (over 60 months) – £2,475
- Expenses – £290
- VAT – £750
- Typical monthly payment – £300
- Total paid by individual – £18,000
- Amount owing at the beginning of the IVA – £31,000
- Net paid to creditors – £13,235 (43%)
- Amount written off at the end of the IVA – £17,765 (57%)
Example based on a typical client – with unsecured debts of around £31,000 who has no equity in any property and completes a 5 year IVA.
We Have The Answers
The full name of an IVA is an Individual Voluntary Arrangement.
An IVA is a formal debt solution where you agree to make an affordable monthly contribution to your debts usually for 5 years along with any equity from your assets. In return, any remaining unsecured debt obtained before the IVA was accepted by your creditors will be cleared.
The aim of an IVA is to help you retain your property. The Insolvency Practitioner will only be interested in any equity. We will be able to fully explain what will happen with your property.
A qualified Debt Support Trust advisor can discuss your assets with you. Contact us today for debt help.
No, your creditors have a decision whether to accept, reject or modify your proposal. The better the offer you put to them the more likely they are to accept.
After your proposal is sent to the creditors a meeting is then held (which you do not have to attend). The creditors can accept, reject or modify your proposal. If 75% of your creditors who vote at the meeting approve your proposal then it will be automatically accepted. Each creditor gets one vote for every pound they are owed.
Your creditors have the right to reject your proposal. However, it’s unlikely an insolvency company will put a proposal to your creditors if they do not think your creditors will accept.
If a Scottish Trust Deed is suitable for you then a Debt Support Trust debt advisor will fully advise you on the process.
If your property has been repossessed then the mortgage owner (s) would be liable for any shortfall between the mortgage value and the sale cost (including any fees).
So, for example, if your house is sold for £100,000 but your mortgage is £120,000 then you would have an unsecured shortfall of £20,000 + fees. You would be liable to pay this money.
A mortgage company can legally chase you for any shortfall within your house for 12 years after the house has been sold in England, Wales and Northern Ireland. In Scotland the time limit is 5 years.
In an IVA or Bankruptcy your shortfall from your house sale can be included. If your IVA is accepted and you complete it satisfactorily, then your mortgage company cannot ask you to make any further payments for a shortfall from the sale of your house.