What is an IVA?
An IVA (Individual Voluntary Arrangement) is a formal financial agreement between you and your unsecured creditors in which you’ll be required to pay as much as you can afford towards your unsecured debts each month. At the end of the IVA – as long as you’ve upheld your side of the agreement – any outstanding unsecured debt will be written off.
IVAs are designed for people with high levels of unsecured debt that they cannot afford to repay, but that they can afford to make reduced monthly payments towards.
Providing you can commit to making monthly payments for the duration of an IVA, your creditors will agree to freeze interest, not take any (further) legal action against you and write off any remaining unsecured debt once the IVA has drawn to a successful close.
Here’s a quick run-down of how an IVA works:
- Before you enter an IVA, you – and your IP (Insolvency Practitioner) – will draw up an IVA proposal. This will be sent to your creditors for them to review and vote for or against.
- Voting creditors accounting for at least 75% of your total debt must agree to the terms of the IVA for it to go ahead.
- If enough creditors agree, your IVA will begin and you will start making your reduced monthly payments to your IP – who will subsequently share funds amongst your creditors according to how much you owe each of them.
- If you are a homeowner, you may be expected to release some of the equity in your property during the final year of your IVA. This money will be used to repay more of your debt.
- Once you have made your final payment, your IVA will draw to a successful close and any outstanding unsecured debt will be written off. You will now be legally debt free – in terms of unsecured debt.
Please note: Your IVA will stay on your credit report for 6 years from the time it starts. This will affect your ability to obtain further credit for this time.
IVA Question: Can my creditors chase me for my debts on an IVA?
