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IVA – Individual Voluntary Arrangement

The advantages of an IVA:

Become debt free in a few simple steps

No more letter & calls
One affordable monthly payment
Free interest & charges
Write off up to 75% of your debt
  • You maintain monthly payments at an affordable level
  • You keep your house – although you may need to release some of the equity that is available
  • Any unaffordable debt will be written off – on average this is 50% to 60% of the original debt
  • Interest and charges are frozen
  • Your creditors are legally prevented from taking enforcement action against you such as petitioning for your bankruptcy

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What is an IVA?

 

An IVA or Individual Voluntary Arrangement is a legally binding contract between you and your creditors to pay off as much of your debts as you can afford over what is usually a 5 year period.

They were first introduced by the Government in 1986 as a way of helping creditors (the people you owe money) recover more money than they would have received in Bankruptcy and debtors avoid some of the main drawbacks of bankruptcy.

Assuming your creditors agree to your proposal (75% by value of debt must vote in favour of it), interest and charges will be frozen and you and your home will be legally protected from any further enforcement action by your creditors.

How much debt is written off with an IVA?

 

The principle behind an IVA is that the debtor (who owes the money) repays what they can realistically afford each month over a five year period. How much debt is written off depends on how much was owed originally and how much the debtor is able to repay over the five years.

“You can have up to 70% of your debts written off”

Is there a catch?

Surprisingly, a lot of people don’t opt for an IVA because they think it sounds too good to be true. To set the record straight, an IVA is in fact a very real debt solution that is written off into statute (UK Government Insolvency Act 1986). An IVA is started in the UK about every 13 minutes. See also IVA Gov

Where can you get an IVA?

Only an insolvency practitioner can propose and manage your IVA. We work with a number of experienced Insolvency Practitioners to help secure an IVA that works best for you. If you are considering an IVA, there are important factors to consider when looking for an IVA company.

How much does an IVA cost?

The cost of an IVAdepends on how much you can afford to pay your creditors each month and whether any assets that you own have any equity in them that can be released. Your monthly payment is based on how much you have left over after your essential living costs and priority debt re-payments have been accounted for.

It doesn’t matter how much your current monthly creditor payments are, you will only be expected to pay what you can afford. The licensed professional that administers the IVA, known as an Insolvency Practitioner, does receive a fee for setting up and managing the arrangement.

But, IVAs are often described as ‘free IVAs’ because the fee is actually part of your monthly payment you make to your creditors, so it is paid to the Insolvency Practitioner at no extra cost to you.

However, it’s still important that you are aware that fees are involved as there are rare circumstances which may result in you being liable for an amount equivalent to the fees in addition to the debt – for example, if you received a windfall such as winning the lottery, which meant you were able to pay back all of your debts or if your IVA fails, which means you’ll have paid an amount in irrecoverable fees up to that point.

IVA pros and cons

The advantages of an IVA are:

  • You can maintain monthly payments at an affordable level
    You keep your house – although you may need to release some of the equity that is available
  • Any unaffordable debt will be written off – on average this is 50% to 60% of the original debt
  • Interest and charges are frozen
  • Your creditors are legally prevented from taking enforcement action against you such as petitioning for your bankruptcy
  • You can maintain monthly payments at an affordable level
  • You’re facing up to your debts and repaying as much of the borrowed money as you can afford
  • You’re hopefully on the road to financial recovery

The disadvantages of an IVA are:

  • You’ll need to be disciplined with your spending and stick to a budget for 5 years
  • If you own a house with equity, you may be asked to release some of it
  • A record of your IVA will be held on the Insolvency Register as well as on your credit file for 6 years. This means your credit rating will be affected during that time, making borrowing money more difficult and more expensive
  • If your IVA does fail for whatever reason, any fees you have paid up to that point won’t be recoverable

Would you qualify for an IVA?

You’ve had the IVA explained, and now you want to find out if you want qualify. To be eligible for an IVA, you need to: have at least £6,000 or more of unsecured debt, have two or more creditors, be resident in England or Wales, and have a steady income.

IVA Application

The process involved in setting up an IVA is as follows:

  1. Contact us to discuss your options
  2. An IVA proposal pack will be sent to you for you to review, sign and send back to your Insolvency Practitioner
  3. A date for a Meeting of Creditors is set and as long as creditors representing 75% of the value of your debt agree, the IVA will be passed

FAQs

What does IVA stand for?

IVA stands for Individual Voluntary Arrangement. It’s one of the ‘Big 4’ debt solutions and it’s been around since 1986 when the government introduced it as an alternative and supplementary solution to bankruptcy. This means that an IVA offers an opportunity of getting serious debts under control for tens of thousands of people every years.

Like bankruptcy and IVA is an official solution that involves IVA companies, and Insolvency Practitioners and once set-up is legally binding. However it does offer many unique advantages. The biggest and most popular of these is the ability to write off the part of your debt you simply can not afford to repay. On average this works out at about 50% but can be as high as 75%. You then pay the balance of what you owe over 5 years with your monthly repayments going to the Insolvency Practitioner managing you arrangement.

To to eligible for an Individual Voluntary Arrangement you have to have debts of £15,000 or more, owe more than 3 creditors money and be in full time employment or have a partner working.

Applying for an IVA

If you apply for an IVA, our will help you ensure you get to use a company offering a free IVA. Give us a call and see whether an IVA is for you and who’s the best IVA company to manage your IVA application.

More about IVAs?

  • Introduced by the Government in 1986 as an alternative to bankruptcy
  • Typically, you need to owe more than £15,000 and have something to offer to your creditors each month
  • Typically you can write-off 50% – 60% of your debt and pay the balance over 5 years (60 months)
  • Interest and charges stop and creditors can’t change their mind
  • Your home is protected but you may be required to release any equity you have
  • Someone enters an IVA in England and Wales every 13 minutes
  • We only recommend organisations that have a track record of getting IVA’s accepted by creditors and don’t charge upfront fees

Find Out More About The Debt Solutions Considered

Solutions Debts Written Off Legally Binding Interests & Charges Residential Status Fees Notes
IVA Yes – Average 58% Yes Stopped Tenant or Homeowner (Eng/Wales) Yes on average around 20% of the payments you make to creditors Typically you must have debts over £15,000 and be able to offer yourcreditors about 20% of the value of the debt back over 5 years.
Debt Management No No Many Freeze Tenant or Homeowner Yes In a Debt Management Plan, you will be required to repay all of your debt in full.
Consolidation No yes New Rates & Charges Tenant or Homeowner Yes Consolidating your debts generally means you’ll pay more back over a longer period of time.
Bankruptcy yes yes Stopped Tenant or Homeowner (Eng/Wales) Yes – up to £700 depending on your circumstances. You may also be subject to a 3 year Income Payments You need to think carefully about all the affect bankruptcy will have on your home and your employment.
Debt Relief Order yes yes Stopped Tenant Yes – £90 You must have debts under £15,000 and have little in the way of assets

 

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