An Individual Voluntary Arrangement – IVA is a formal agreement between you and your creditors where you will come to an arrangement with people you owe money to, to make reduced payments towards the total amount of your debt in order to pay off a percentage of what you owe then generally after 5 years your debt is classed as settled. Due to its formal nature, an Individual Voluntary Arrangement – IVA has to be set up by a licensed professional called an Insolvency Practioner (IP).
It is generally for people who have:
- Debts of £15,000 or higher
- 3 or more creditors or unsecured debts e.g. credit card debts
- A disposable income of at least £225
- At least £1,000 monthly income
Its Purpose?
It is a legally binding agreement between you and your creditors (people you owe money to). It helps those in financial difficulties to make a formal proposal to settle their debt.
What Are The Arrangements?
Monthly payments are based on an affordable disposable income. Once the final payment is made, any outstanding debt is legally written off. The arrangement can write off up to 75% of your debts (subject to your circumstances).
How does it work?
Debts are settled within a reasonable and fixed period of time (normally 5 years). Any interest and debt charges will be frozen and creditors will be prohibited from demanding additional payments.
Once a decision has been made that an Individual Voluntary Arrangement – IVA is right for you, you will be asked questions regarding your current financial situation. Based on the information you have given, a repayment amount will be agreed with you. Once proposals have been drawn up you will need to check and sign these and return them to your Insolvency Practitioner (IP) .
An application may then be made to the court for an Interim Order . Once this is in place, no creditors will be able to take legal action against you. A creditor meeting will be arranged to which you should attend.
For an Individual Voluntary Arrangement – IVA to be approved, creditors will be called upon to vote either for or against the arrangement. If only one creditor votes “for” the Individual Voluntary Arrangement – IVA, the Individual Voluntary Arrangement – IVA will be approved. However, if only one creditor votes against the Individual Voluntary Arrangement – IVA and they represent less than 25% of your total debt, the meeting will be suspended for a later date and other creditors who did not vote will be called upon for their vote.