What Is An IVA?
Individual Voluntary Arrangement
Below we try to demystify the IVA process. We have used simple language and where jargon is used we have given clear definitions in [brackets].
IVAs were first used in the UK in the mid/late1980s and since then they have become very popular for people with a lot of unsecured debt.
It is a binding contract made between a debtor [someone who owes money] and his or her creditors [the people they owe money to] with regards to clearing their debts. IVAs are seen as an effective alternative to bankruptcy, giving those in debt a way of making affordable repayments, reducing their debt and protecting their assets [property].
Debt levels and bad credit [where payments have not been kept up with] are at the moment very high in the UK, therefore IVAs have become very popular for those looking for a workable solution to their debt problems.
There are a few things to bear in mind if you are thinking about choosing an IVA solution. Firstly, there are a lot of IVA "experts" out there but most seem to be in it just to make a quick profit rather than having the clients best interests in mind. There are also many upfront fee charging companies out there - we do not charge upfront fees. These companies can make thousands from every IVA they arrange and we would always advise against going with a fee charging practitioner.
There are also some negative aspects of setting up an IVA to bear in mind and some of these can have a long term effect eg substantially lowering your credit rating etc. Not everyone in debt is suitable for an IVA, there is a criteria to be met before you would be able to proceed: your total unsecured debts must be £15,000+ [money owed that has not been secured on property] you must owe the money to 3 or more creditors you must be in full time employment.
Even then an IVA application could fail for many reasons, the most important one being that your creditors have to vote in favour or against the proposal. The weight of their vote [the strength or importance of it] is proportional to the amount of money they are owed. For example the person you owe the most money to will have the biggest say. But, if the majority vote is in favour of the arrangement any objections are overruled.
With so many more people choosing the IVA option nowadays, creditors are increasingly voting against more and more arrangements. In these cases other options may have to be considered. If your creditors vote in favour of the IVA arrangement an affordable monthly payment plan will be devised based on your income and expenditure [the money you have coming in and going out] this will be a set amount per month and is usually for five years. This amount is shared between your creditors and is calculated according to the amount each one is owed. After the five years is up the remaining money owed is simply written off and your debt is considered as being clear. Your repayments will then stop.
Under an IVA your assets [property eg your home] are protected. Creditors, their agents or bailiffs cannot try to get money off you and an "Interim Order" is usually set up to stop them from doing this before the IVA is fully set up. Another benefit is that interest and charges will be frozen once the IVA is arranged.
