IVA

What is IVA ?

An Individual Voluntary Arrangement (IVA) is a legally restricting arrangement made among you and your lenders to take care of your debts with a reimbursement plan that suits your conditions. Since it is a formal and legal debt arrangement; you, as well as your lenders, are obliged to keep up with the understanding. When you go into an IVA your loan bosses can’t make any further move against you.

An IVA is set up and overseen by a Insolvency Practitioner (IP)

In an IVA, a solitary regularly scheduled instalment and is concurred with your ongoing monetary circumstance thought about to suit your conditions – this instalment is then split between individuals you owe cash to .Over the span of your arrangement all interest and expenses related to your debts are frozen. Toward the finish of the IVA the leftover debts are discounted.

How does an Individual Voluntary Arrangement (IVA) work?

An Individual Voluntary Arrangement (IVA) is a legal understanding among you and your banks to repay your debts over a set timeframe. This is the secret:

Evaluation: You will work with a Insolvency Practitioner (IP) who will assist you with surveying your funds and decide whether an IVA is the most ideal choice for you. They will assist you with making a proposition framing how you intend to reimburse your debts.

Proposition: Your IP will introduce your proposition to your banks, who will then, at that point, vote on the choice about whether to acknowledge it. For the IVA to be supported, somewhere around 75% of your lenders (by debt esteem) need to consent to it.

Reimbursement: In the event that your IVA is endorsed, you will make customary instalments to your IP, who will then, at that point, circulate the cash to yourbanks. The instalments will ordinarily keep going for about five years, albeit this can fluctuate contingent upon your conditions.

Culmination: Whenever you have made every one of the settled upon instalments, any leftover debts remembered for the IVA will be discounted, and you will be viewed as without debt.

How Does an IVA Write Off Debts?

Before we dive into how an IVA can write off your debts, let’s first take a quick look at how the process works. An IVA is a legally binding agreement between you and your creditors, typically lasting for five or six years. During this time, you will make regular payments towards your debts, based on what you can afford.

To set up an IVA, you will work with an Insolvency Practitioner (IP) who will help you to put together a proposal outlining how you plan to repay your debts. Once this proposal has been agreed upon by your creditors, you will start making regular payments to your IP, who will then distribute the money to your creditors.

After the agreed-upon period of time (typically five or six years), any remaining debts included in the IVA will be written off. This means that you won’t have to pay them back in full, although there are some exceptions to this rule which we’ll explore later.

How does an IVA write off debts?

An IVA can write off your debts in a few different ways. Let’s take a closer look at each of these:

  • Lump sum payment

If you receive a lump sum of money during the course of your IVA, you may be able to use this to settle some or all of your debts. For example, you might receive a windfall such as an inheritance or a redundancy payment. If this happens, you may be able to offer a lump sum to your creditors to settle your debts, which could result in some of them being written off.

  •  Equity release

If you own a property, you may be able to release some of the equity in it to pay off your debts. This can be done by remortgaging your property or securing a loan against it. Any debts that are paid off using equity release would be considered settled and would not need to be repaid in full.

  • Write-off at the end of the IVA

As we mentioned earlier, any debts that are included in your IVA will be written off at the end of the agreed-upon period (typically five or six years). This means you won’t have to pay them back in full, although you will need to have made all the agreed-upon payments during this time.

  • Exceptions to the rule

It’s important to note that not all debts can be written off through an IVA. Some debts, such as student loans, court fines, and child support payments, cannot be included in an IVA and will still need to be repaid in full.

If you’re struggling with debt and want to explore your options, speak to an experienced debt advisor who can help you decide if an IVA is a suitable choice for you.

Which Debts You Can Include in an IVA?

If you’re struggling with debt and considering an Individual Voluntary Arrangement (IVA), it’s important to understand which debts you can include in the agreement. An IVA is a legally binding agreement between you and your creditors to pay back your debts over a set period of time, so it’s crucial to ensure that all relevant debts are included. In this article, we’ll explore which debts you can include in an IVA.

  • Unsecured debts

The most common type of debt included in an IVA is unsecured debt. This includes debts like credit card debts, personal loans, store card debts, and overdrafts. Unsecured debts are those that are not secured against any assets, such as a property or car, which means that your creditors cannot repossess them if you fail to make the payments.

  • Council tax arrears

Council tax arrears can also be included in an IVA. However, it’s important to note that if you have council tax arrears, you will still need to continue paying your ongoing council tax bills during the IVA. This is because council tax is considered a priority debt and cannot be included in the IVA payments.

  • Utility bills

Utility bills, such as gas, electricity, and water bills, can also be included in an IVA. However, it’s important to ensure that you keep up with your ongoing utility bills during the IVA, as these are considered priority debts and cannot be included in the IVA payments.

  • Payday loans

Payday loans can be included in an IVA, along with other forms of high-interest debt. This can be particularly helpful if you are struggling to keep up with the repayments on these types of loans, which often have high interest rates and can quickly spiral out of control.

  • Catalogue debts

Catalogue debts can also be included in an IVA. This includes debts that you may have with mail-order catalogues, where you have purchased items on credit and need to make regular repayments.

  • Business debts

If you are a self-employed individual and have business debts, you may be able to include these in an IVA. However, it’s important to work with an experienced insolvency practitioner who can help you understand the complexities of including business debts in an IVA.

In conclusion, there are a variety of debts that can be included in an IVA, including unsecured debts, council tax arrears, utility bills, payday loans, catalogue debts, and business debts. However, it’s important to ensure that you keep up with any ongoing payments on priority debts, such as council tax and utility bills. If you’re considering an IVA, it’s important to work with an experienced insolvency practitioner who can help you understand which debts can be included and whether an IVA is the right choice for you.

Debts that can be included in an IVA:

  1. Unsecured debts, such as credit card debts, personal loans, store card debts, and overdrafts
  2. Council tax arrears
  3. Utility bills, such as gas, electricity, and water bills
  4. Payday loans
  5. Catalogue debts
  6. Business debts (for self-employed individuals)

Which Debts You Can’t Include in an IVA?

There are several types of debt that cannot be included in an Individual Voluntary Arrangement (IVA). An IVA is a legally binding agreement between you and your creditors to pay back your debts over a set period of time, but it’s important to understand which debts are excluded from the agreement. In this article, we’ll explore the debts you cannot include in an IVA.

  • Secured debts

Secured debts, such as mortgages or car loans, cannot be included in an IVA. These debts are secured against assets, such as your property or car, which means that your creditors have the right to repossess the asset if you fail to make the payments.

  • Court fines and compensation orders

Debts related to court fines or compensation orders cannot be included in an IVA. These debts are considered to be a form of legal obligation and cannot be written off through insolvency proceedings.

  • Child support or maintenance payments

Debts related to child support or maintenance payments cannot be included in an IVA. These debts are considered to be a legal obligation and must be paid in full.

  • Debts incurred after the start of the IVA

Any debts incurred after the start of the IVA cannot be included in the agreement. This means that you must continue to make payments on any new debts that you may incur during the IVA period.

  • Debts owed to family or friends

Debts owed to family or friends cannot be included in an IVA. These debts are considered to be a personal obligations and must be paid in full.

  • Debts related to fraud or criminal activity

Debts related to fraud or criminal activity cannot be included in an IVA. This includes fines associated to criminal activities or debts related to fraudulent activities.

  • Business debts (if you’re not self-employed)

If you’re not self-employed, you cannot include business debts in your IVA. Business debts can only be included in an IVA if you’re self-employed and the debts are related to your business.

  • Joint debts

If you have a joint debt with someone else, you cannot include that debt in your IVA unless they also enter into an IVA or agree to take on full responsibility for the debt.

  • Debts that have already been written off

If a creditor has already written off your debt, it cannot be included in your IVA.

  • Debts in foreign currency

Foreign currency debt cannot be included in an IVA, as they are subject to different laws and regulations.

  • Debts with no formal agreement

If you owe money to someone but there is no formal agreement in place, such as a loan agreement or credit agreement, then that debt cannot be included in an IVA.

  • Debts that are already being paid through another insolvency procedure

If you’re already paying off your debts through another insolvency procedure, such as bankruptcy or a Debt Relief Order, you cannot include those debts in an IVA.

Benefits of an IVA:

  1. Reduced monthly payments: An IVA allows you to consolidate your debts and make reduced monthly payments based on what you can afford.
  2. Protection from legal action: Once your IVA is approved, your creditors cannot take any legal action against you or contact you for payment.
  3. Interest and charges freeze: Your creditors are legally required to freeze any interest and charges on your debts once your IVA is approved.
  4. A fixed end date: An IVA has a fixed end date, usually around five years, after which any remaining debts are written off.
  5. No more debt collection calls: Once your IVA is in place, you’ll no longer receive debt collection calls or letters from your creditors.
  6. One affordable payment: An IVA allows you to make one affordable payment each month, rather than making multiple payments to different creditors.
  7. Protects your home: An IVA can help protect your home from repossession, as long as you keep up with your mortgage payments.
  8. Avoids bankruptcy: An IVA is a viable alternative to bankruptcy, which can have serious long-term consequences.
  9. No need to sell assets: You don’t need to sell any assets, such as your home or car, to pay off your debts through an IVA.
  10. Debt written off: Any remaining debts after the IVA period are completed are written off, giving you a fresh start.
  11. Professional support: An IVA is overseen by a licensed insolvency practitioner, who will provide professional support throughout the process.
  12. Reduced stress: An IVA can help reduce the stress and anxiety associated with unmanageable debts.
  13. Improved credit score: An IVA can help improve your credit score over time, as long as you make your payments on time.
  14. Flexible payment options: Your payments can be adjusted if your financial circumstances change, making an IVA a flexible option.
  15. Legal protection: An IVA is a legally binding agreement, which means that your creditors are legally required to adhere to the terms of the agreement.

Risks of an IVA:

  1. Potential negative impact on credit score: An IVA can negatively impact your credit score, which can affect your ability to obtain credit in the future.
  2. Risk of failure: If you’re unable to make your monthly payments, your IVA may fail, which could result in legal action from your creditors.
  3. Limited debt types: Certain debts, such as secured debts and debts owed to family or friends, cannot be included in an IVA.
  4. Public record: Your IVA will be recorded on the public Individual Insolvency Register for a period of time, which can affect your reputation.
  5. Loss of assets: If you fail to make your IVA payments, you could be at risk of losing assets, such as your home or car, to pay off your debts.
  6. Potential tax implications: If you have any outstanding tax debts, they may be included in your IVA, but you could still be liable for any future tax liabilities.
  7. Reduced financial flexibility: During the period of your IVA, you may have limited financial flexibility, which could impact your ability to save or invest.
  8. Potential for longer repayment period: In some cases, an IVA may require you to make payments for a longer period of time than other debt management options.
  9. Risk of non-compliance: If you fail to comply with the terms of your IVA, it could be revoked, which could result in legal action from your creditors.
  10. Negative impact on employment: Some professions require employees to disclose any personal insolvency arrangements, which could negatively impact your employment opportunities.
  11. Cost of insolvency practitioner: You will need to pay an insolvency practitioner to oversee your IVA, which can be a significant cost.
  12. Limited access to credit: During the period of your IVA, you may have limited access to credit, which could impact your ability to obtain essential loans, such as a mortgage or car loan.

IVA Requirements – Who is Eligible for an IVA? in the UK

  • You must have unsecured debts of at least £7200.
  • You must owe money to at least two creditors.
  • You must have a regular income, either from employment or self-employment.
  • You must have a disposable income of at least £105 per month to contribute towards your IVA payments.
  • You must be a resident of England, Wales, or Northern Ireland.
  • You must not have any outstanding county court judgements (CCJs) against you.
  • You must not have been declared bankrupt in the past 12 months.
  • You must not be subject to any legal action, such as a bankruptcy petition or a charging order.
  • You must be willing to make reduced monthly payments towards your debts.
  • You must be willing to disclose your financial information to your insolvency practitioner and your creditors.
  • You must be committed to making your IVA payments for the duration of the agreement, which is usually around five years.
  • You must not have any significant assets, such as a large amount of equity in your home, that could be sold to pay off your debts.
  • You must be willing to pay the fees of your insolvency practitioner, which can be significant.
  • You must be willing to adhere to the terms of the IVA, including not taking out any further credit without the approval of your insolvency practitioner.
  • You must be willing to have your IVA recorded on the public Individual Insolvency Register.

IVA Fees – How Much Does an IVA Cost?

If you are considering an Individual Voluntary Arrangement (IVA) as a debt solution, it’s important to understand the fees involved. Here are some key points to consider:

  • Your insolvency practitioner will charge fees for their services, which can vary depending on the complexity of your case and the amount of work required. These fees will be deducted from your monthly payments before they are distributed to your creditors.
  • The fees charged by your insolvency practitioner will typically include an initial set-up fee, which covers the costs of assessing your financial situation and preparing your IVA proposal. This fee can range from £1,500 to £5,000, depending on the complexity of your case.
  • In addition to the set-up fee, your insolvency practitioner will charge ongoing fees for the duration of your IVA. These fees will cover the cost of administering your IVA, including distributing payments to your creditors, dealing with creditor enquiries, and monitoring your progress. The ongoing fees will typically range from £200 to £500 per month.
  • It’s important to note that the fees charged by your insolvency practitioner will be deducted from your monthly payments before they are distributed to your creditors. This means that your creditors will receive less money overall, which could mean that your IVA takes longer to complete.
  • Some insolvency practitioners may also charge additional fees for certain services, such as preparing your annual report or dealing with creditor objections. Make sure you understand all of the fees involved before agreeing to an IVA.
  • If your IVA fails, you may be liable for any outstanding fees owed to your insolvency practitioner. This could result in further financial difficulties.
  • It’s also worth noting that some debt management companies may charge fees for referring you to an insolvency practitioner. Make sure you understand any referral fees involved before agreeing to any services.

Overall, the fees involved in an IVA can be significant, so it’s important to consider all of the costs involved before making a decision. However, for many people, the benefits of an IVA, such as being able to write off a significant portion of their debts, can outweigh the costs.

How Long Does an IVA Last?

An Individual Voluntary Arrangement (IVA) typically lasts for a period of five years, although this can vary depending on your individual circumstances. During this time, you will be required to make regular monthly payments towards your debts, based on what you can afford. Once your IVA is completed, any remaining debts will be written off, and you will be debt-free.

The length of your IVA will be agreed upon by you and your creditors, based on what is affordable and reasonable for both parties. If your creditors agree to your proposal, they will be bound by its terms, and they will not be able to pursue you for any outstanding debts once your IVA is completed.

It’s important to note that you will need to adhere to the terms of your IVA for the duration of the agreement. This means making your monthly payments on time and in full, and not taking on any further credit without the approval of your insolvency practitioner. Failure to comply with the terms of your IVA could result in its failure, which could lead to further financial difficulties.

Once your IVA is completed, you will receive a certificate of completion, and any remaining debts included in your IVA will be written off. This can be a huge relief for many people who have been struggling with debt for years, and can provide a fresh start and a new financial outlook.

Overall, the length of an IVA can vary depending on your individual circumstances, but it typically lasts for around five years. It’s important to consider all of the implications of an IVA before agreeing to the terms, and to ensure that you fully understand your obligations and responsibilities throughout the agreement.

What Happens at the End of an IVA?

At the end of an Individual Voluntary Arrangement (IVA), any remaining debts included in the agreement will be written off, and you will be debt-free. You will receive a certificate of completion, which you can provide to credit reference agencies to update your credit report.

You can start rebuilding your credit rating and move forward with a fresh financial start.

The IVA Experience: Life During an IVA

Life during an Individual Voluntary Arrangement (IVA) can be challenging, but it can also provide a sense of relief and stability for those struggling with debt. Here are some key aspects of the IVA experience:

  1. Budgeting: During an IVA, you will need to stick to a strict budget to ensure you can afford your monthly repayments. This can be a significant adjustment, but it can also provide a sense of control over your finances.
  2. Communication: Your Insolvency Practitioner will be your main point of contact throughout your IVA. It’s important to maintain regular communication with them to ensure you are meeting the terms of your agreement and to address any issues that may arise.
  3. Restrictions on credit: During an IVA, you will not be able to take on any further credit without the approval of your Insolvency Practitioner. This can be frustrating, but it can also prevent further financial difficulties.
  4. Debt-free future: Completing an IVA can provide a huge sense of relief and freedom from debt. It can be a fresh start to build a better financial future.
  5. Emotional support: Dealing with debt can be emotionally challenging. Your Insolvency Practitioner can provide guidance and support throughout the process, and there are also many resources available to help with managing stress and anxiety.

Overall, an IVA can be a challenging experience, but it can also provide a way out of debt and a fresh start towards a better financial future. It’s important to consider all aspects of an IVA and to seek guidance from a qualified professional to determine if it is the right solution for your situation.

Can You Get a Mortgage With an IVA?

It is possible to get a mortgage with an Individual Voluntary Arrangement (IVA), but it can be challenging. Here are some key points to consider:

  • Timeframe: Most mortgage lenders will require you to have completed your IVA before they consider you for a mortgage. This means you will need to wait until your IVA has been successfully completed, and you have received a certificate of completion.
  • Credit score: Your credit score will be impacted by your IVA, and it may take some time to rebuild your credit rating after completing the agreement. This can make it challenging to obtain a mortgage, as most lenders require a good credit score.
  • Lenders’ policies: Every mortgage lender will have its own policies and criteria when it comes to lending to individuals with an IVA. It’s important to do your research and find a lender that is willing to consider your application.
  • Deposit: You will likely need to have a larger deposit than someone without an IVA to secure a mortgage. This is because lenders may consider you to be a higher risk, and they will want to mitigate this risk by requiring a larger deposit.
  • Specialist lenders: There are specialist lenders who work specifically with individuals who have had credit issues, including IVAs. These lenders may be able to offer more flexible terms and criteria, but they may also have higher interest rates and fees.

Overall, getting a mortgage with an IVA can be challenging, but it’s not impossible. It’s important to seek advice from a qualified mortgage advisor, who can help you navigate the process and find a lender that is willing to consider your application.

Bank Accounts, Savings, and Pensions :

When you enter into an Individual Voluntary Arrangement (IVA), it’s important to understand how it will impact your bank accounts, savings, and pensions. Here are some key points to consider:

  1. Bank accounts: You will be able to keep your current bank account when you enter into an IVA. However, you may need to open a new basic bank account if your current account has an overdraft or other credit facilities.
  2. Savings: You may be required to use any savings you have to contribute towards your IVA. However, this will depend on the terms of your agreement and the discretion of your Insolvency Practitioner.
  3. Pensions: Your pension will not be affected by your IVA, and you will be able to continue contributing to it as normal.
  4. Joint accounts: If you have a joint bank account with someone who is not part of your IVA, it’s important to inform your bank and your Insolvency Practitioner. You will still be responsible for your share of the account, but you will not be able to access any credit facilities.
  5. Credit facilities: During your IVA, you will not be able to take on any further credit without the approval of your Insolvency Practitioner. This includes overdrafts, credit cards, and loans.
  6. Inheritance: If you receive an inheritance during your IVA, you will be required to contribute a portion of it towards your agreement. The amount will depend on the terms of your agreement and the discretion of your Insolvency Practitioner.

Overall, it’s important to understand how your bank accounts, savings, and pensions will be impacted by your IVA. It’s recommended that you speak with a qualified Insolvency Practitioner, who can provide guidance on your specific situation and help you navigate the process.

How to Manage an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) can be an effective way to manage your debts and get your finances back on track. However, it’s important to understand how to manage your IVA effectively, to ensure that you meet your obligations and successfully complete the agreement. Here are some tips on how to manage an IVA:

  • Stick to your budget: Your IVA will require you to make regular payments towards your debts. It’s important to ensure that you stick to your budget and make these payments on time. This will help you to avoid any default charges or further legal action.
  • Keep in touch with your Insolvency Practitioner (IP): Your IP will be responsible for managing your IVA, and they will be your main point of contact throughout the agreement. It’s important to keep in touch with your IP and inform them of any changes to your circumstances or financial situation.
  • Maintain accurate records: Keeping accurate records of your finances, including your income and expenses, will help you to manage your IVA effectively. This will help you to ensure that you stick to your budget and make your payments on time.
  • Seek advice if you’re struggling: If you’re struggling to meet your payments or you’re facing other financial difficulties, it’s important to seek advice as soon as possible. Your IP will be able to provide guidance and support, and they may be able to adjust your payments or terms of your agreement if necessary.
  • Avoid taking on further credit: During your IVA, you will not be able to take on any further credit without the approval of your IP. It’s important to avoid taking on any further credit, as this could jeopardise your agreement and put you at risk of further legal action.
  • Attend your annual review: Your IVA will include an annual review, which will assess your progress and ensure that you’re meeting your obligations. It’s important to attend this review and provide any requested information, to ensure that your IVA continues to run smoothly.
  • Plan for the end of your IVA: As you approach the end of your IVA, it’s important to plan for your future finances. This may include setting financial goals, rebuilding your credit score, and seeking advice on how to manage your finances effectively after your agreement ends.

Overall, managing an IVA can be challenging, but it’s important to stay committed and follow the advice of your Insolvency Practitioner. With careful planning and management, you can successfully complete your agreement and get your finances back on track

Types of IVAs :

  1. Lump Sum IVA: This type of IVA involves making a one-off payment to your creditors to settle your debts. This payment is typically made using funds from a lump sum, such as a cash lump sum from a third party, or equity released from your property.
  2. Income-Based IVA: This type of IVA involves making regular payments to your creditors over a set period of time, typically five to six years. The amount you pay will be based on your income and expenses, and any disposable income you have left over after covering your essential living expenses.
  3. Joint IVA: If you have joint debts with someone else, such as a partner or spouse, you may be able to enter into a joint IVA. This allows both parties to contribute towards the IVA, and can be a useful way to manage joint debts and ensure that both parties are making a fair contribution towards repaying the debts.

Can You Cancel An Individual Voluntary Arrangement (IVA)?

Yes, it is possible to cancel an Individual Voluntary Arrangement (IVA), but there are certain implications and consequences that you should be aware of before doing so.

If you decide to cancel your IVA, you will need to contact your insolvency practitioner (IP) and inform them of your decision. Your IP will then contact your creditors to inform them that the IVA is being terminated.

Here are some implications of cancelling an IVA:

  • Your creditors may take legal action against you: If you cancel your IVA, your creditors may decide to take legal action against you to recover the debts you owe. This could include issuing a County Court Judgment (CCJ) or even bankruptcy proceedings.
  • Your credit rating will be affected: Cancelling an IVA will have a negative impact on your credit rating, and will remain on your credit file for six years. This may make it more difficult to obtain credit in the future.
  • You may lose any protection from your creditors: While you are in an IVA, your creditors are legally required to stop any further action against you, such as legal action or debt collection. Cancelling the IVA will mean that this protection is no longer in place.
  • You may still be liable for fees: If you cancel your IVA, you may still be liable for any fees that have been incurred by your insolvency practitioner up to that point. These fees can be substantial, so it’s important to consider them before deciding to cancel the IVA.

In summary, while it is possible to cancel an IVA, it’s important to understand the implications and consequences of doing so. It’s important to speak to your insolvency practitioner and get professional advice before making any decisions.