Individual Voluntary Arrangement

If you have surplus income after meeting your essential household and personal expenses, have assets that can be used to pay your creditors or have access to a lump sum -eg from a friend or relative - you may then consider entering into an Individual Voluntary Arrangement (IVA). This will protect you from recovery action that your unsecured creditors may take, and will usually involve your creditors writing off part of what you owe them. A proposal for an IVA will only be approved where enough creditors vote in favour.

The person you choose to supervise your IVA must be licensed and regulated under insolvency law as an insolvency practitioner.

The insolvency practitioner will charge fees for preparing, negotiating and administering your IVA. Before the practitioner asks you to sign up to an IVA, they should give you details of the fees they want to charge you and how these must be paid - whether as a lump sum or from the payments you make into the IVA.

The advantages of an IVA include that:

1. Creditors who vote against your proposal are still bound by it.
2. Creditors whose lending is unsecured can't take any further action.
3. Interest is usually frozen as long as you keep up your payments.
4. Your insolvency practitioner will help you prepare your proposal, including agreeing the level of your household and personal spending based on guidelines acceptable to creditors.
5. Many insolvency practitioners will allow you to pay their fees for preparing your proposal monthly, as part of the IVA.
   You make only a single payment each month or quarter. Your insolvency practitioner is responsible for administering and distributing your payments.
6. The terms of an IVA will usually enable you or your spouse or partner or a relative to make arrangements to buy your share of the net worth of your home or to make extra payments, rather than the home having to be sold. This may be done through a remortgage or a loan. Net worth means its value after any debts secured on it have been paid.
7. On completion of the IVA, the balance of what you owe your creditors is written off.
8. You may be able to continue running any business you have.

The disadvantages include that:

1. Your IVA is entered on a public register - for more information, see our guide on the Individual Insolvency Register.
2. The insolvency practitioner may require payment in advance for preparing your proposal and getting your creditors' agreement
3. If there is some equity (value) in your home after taking account of the mortgage(s) on it, you will probably have to pay for your share, usually in the fifth year of your IVA, by remortgaging the property. If you can't get a remortgage, you may have to continue making monthly or quarterly payments from your income, for up to another year.
4. If your circumstances change, and your practitioner can't get creditors to accept amended terms, the IVA is likely to fail. You will then still owe your creditors the full amount of what you owed them at the start, less whatever has been paid to them under your IVA.
5. If your IVA fails, you may be made bankrupt.

 

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