Individual Voluntary Arrangement (IVA) – Ultimate Guide 2021
Are you indebted to several individuals or companies, and struggling to catch up with payments? While you may never want to envisage yourself being in such a scenario, there are things beyond your control that could send you down that lane. Fortunately, you can seek IVA help from reputable insolvency practitioners from My Debt Management Online who will look at your financial position and figure out how much you can pay your creditors, then negotiate with them a new payment schedule, which will help you pay your debt in a time frame of up to six years and restart your life free of debt.
This guide tells you about how IVA works, what you need to apply for an IVA, the eligibility criteria, and how an IVA can save you from being sued and harassed by creditors. Also covered by this article are the pros and cons of getting an IVA, IVA debt management costs, and common questions about this type of loan that may be lingering in your mind. Continue reading and find out how you can restart your life debt-free after using the legally backed IVA debt management solution you can find at MyDebtManagementOnline.com
What Is An Individual Voluntary Arrangement (IVA)?
An individual voluntary arrangement or IVA refers to a formal agreement with legal backing between your creditors and you, detailing your commitment to pay the money that you owe them over an agreed time frame. This agreement should be approved by the court and it is legally binding, so you must stick to it. Fortunately, an IVA agreement can be structured to be flexible according to your unique circumstances and carries some costs and risks which you should consider before you get into the agreement.
For individual voluntary arrangements to take a legal effect, they must be set up by an insolvency practitioner (IP), who could be an accountant, a lawyer, or any other qualified person. There is a fee that you will pay, and this is determined by how much money you pay via the IVA. The IP that you choose for your IVA will deal with your creditors for the entire period that the IVA agreement is active. Residents of England, Northern Ireland, and Wales can enjoy IVA, but this service is not available in Scotland. The IVA repayment plan is flexible and can be agreed upon with your insolvency practitioner.
How Does IVA Advice Work?
An IVA debt help solution is set up and managed by a certified insolvency practitioner, who looks at your financial condition before deciding how much you need to pay and for how long. Also, they act as the intermediary between your creditors and you and ensure that the agreed payment is remitted. Provided that the plan is accepted by at least 75 per cent of your creditors, the IVA goes ahead. Then you can start submitting your monthly repayments to the insolvency practitioner who will split it among the creditors according to the monthly installments that had been agreed.
Is An IVA Right For You?
Are you wondering if an IVA is right for you? If you are a resident of England, Wales and Northern Ireland, and meet the following conditions, then applying for an IVA could be a good option for you:
- Minimum debts of £10,000: While this is the case, you can get an IVA even when your debt is lower, but the fees that you will incur might be extremely high.
- If you have two or more creditors: Creditors are the people that you are indebted to, and would like to enter into a legally binding agreement to settle those debts.
- If you want to avoid directly dealing with your creditors: Dealing with creditors directly can be hectic, so you can avoid this by getting into an IVA agreement and letting a IP dela with the hassle.
- If you are able to make monthly IVA payments: An IVA program can be the right choice for you if you have enough income every month to pay your creditors back. You should own a stable business or have a stable job that you can rely on to get the adequate income to meet your obligation when the payment time comes.
However, there are a few people who may find the IVA program not appropriate.
IVA entails making regular payments to your creditors on a monthly basis for five to six years and this program may not be the most ideal for you if:
- You owe your creditors not more than £10,000.
- When you don’t have a lump sum amount or spare income that you can use to pay your creditors.
- An IVA may not be good if you owe companies or people money in the European Union. These types of debts may not be covered because your creditors may still keep calling and sending you letters.
IVA Debt Solution Example
Assume that you have a debt of £22,000 owed to four creditors, and you have been making a monthly repayment of £600. Then your wife gets sick, so your income gets reduced. This means that you will struggle to pay £600 every month. You approach an IP, who puts in place an IVA on your behalf and gets the repayment reduced to £320 per month. After paying this reduced amount for 60 months, your IVA will be complete. Any balance that remains unpaid is written off completely and you’ll be able to start over again free of debt!
What Is It Covered With An IVA?
| What is Covered With An IVA | What is Not Covered With An IVA |
| Unsecured loans such as credit cards, overdrafts, charge cards, store cards, payday loans, doorstep loans and credit unions | Student loans |
| Debts carried forward from utility supplies such as gas, water, and electricity | Secured loans and mortgages |
| Arrears accrued from digital television, landlines, mobile phones and other services | Rent and property service-charge |
| HRM Revenue, PAYE, customs VAT, National Insurance, and Self-assessment Tax | Payments for hire purchase |
| Debts that had been secured against personal assets that have since been repossessed | Child maintenance |
| Unsecured debts where earnings have been attached | Court fines |
| Debts owed to friends and family |
Costs of an IVA
No matter the professional who helps you with advice on IVA, there are fees and costs that are involved. The costs involved are a nominal fee, supervisor’s fees, and disbursements. The nominal fees are the direct cost for helping you to present your proposal to creditors. Depending on the amount that you pay as your monthly contribution, and the identity of your creditors, the nominal fees could be £2,000 or the first payments that you remit to the IVA. The supervisor’s fees are 15 percent of any further realization and are for covering the ongoing IVA costs. Supervisor’s fees are paid from what remains after the nominal fees have been paid.
Also forming part of the cost is the disbursements. These costs include all amounts that are paid to third parties and include system maintenance fees, insurance payments, and fees for registering your IVA with an Insolvency Service. Any direct amount that is paid to obtain legal advice that is direct to your IVA agreement is charged as a disbursement. If you own a property, land registry and valuation fees will also be incurred. Remember that the fees cannot be refunded whether you are able to pay the IVA debts in full or fail to do so.
IVA Pros and Cons
| PROS | CONS |
| Helps to protect your assets. | You may have to release equity from your property if you own a home. |
| An affordable way to pay your debts. | There is no secrecy or privacy in the process. |
| Creditors will not be able to harass you. | May force you to follow a strict budget. |
| The payment is fixed. | Lowers your credit ratings |
| Charges and interest rates are frozen. | May affect your employment negatively |
| The entire arrangement is legally binding. |
Do You Qualify For An IVA?
To qualify for an IVA, you must meet the following criteria:
- You should have a regular source of income.
- Have debts of at least £6,000 and have more than one creditor.
- If it can be proved that your creditors will get better returns than through bankruptcy.
- You reside in either Northern Ireland, Wales or England
FAQ’s
How does an IVA affect my equity, mortgage, or home?
Your home is fully protected in an IVA arrangement. You will not be able to sell it, but if you have some equity after the mortgage is taken into account, then you may need to release part of that equity through a remortgage, especially in the final year of your IVA.
Can I maintain a bank account in an IVA?
In some instances, it may be necessary for you to change bank accounts while your IVA is being worked on. This is the case especially if the bank is also a creditor with some involvement in your IVA, so they may try to deduct money from your account to cover any outstanding debt.
Is it possible to extend IVA?
Yes, especially when there are missed payments.
Is IVA searchable online?
Yes. There is a register known as the insolvency register that carries information about Debt Relief Orders, Bankruptcies, and IVAs. But you will be removed from this register after the IVA process is completed.
Is it possible to cancel my IVA?
Yes. However, this is not advisable unless there are compelling reasons. You need to discuss this with your supervisor or your IP before you cancel it.
What if my income changes during an IVA?
Your supervisor will review your income and expenses annually in order to make sure that any surplus income is reflected in your monthly IVA payments. Depending on the review, your payments could be adjusted upwards or downwards.
Will my partner’s wages also be included in an IVA?
It is not necessarily. If your partner is not insolvent, then his or her particulars will not be included. However, if you pay mortgage jointly, or have joint debts, or even share living expenses, it’s vital that you disclose this information so that the IVA takes it into account.
For how long can I have IVA in my credit file?
You will have it for six years after the start of the IVA help. If it is not removed after that time has lapsed, then you may have to contact the credit reference bureaus and ask for your name to be removed.
Can I have some savings while on IVA?
It may be necessary for you to retain a small amount to cushion you against contingencies that may come up during the entire period of your IVA. Also, you can be allowed to save any amount that accrues, especially if you keep your expenditure below the level evaluated earlier.
What happens to my pension in my IVA?
IVA doesn’t affect state pension. However, creditors may require that you forfeit contributing any pension until when you are done with IVA debt help.