Debtor’s Guide to Individual Voluntary Arrangement (IVA)

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What is an IVA?

An Individual Voluntary Arrangement (IVA) is a legally binding, court-approved agreement a person makes with their creditors to pay all or part of their debts.

The procedures for Individual Voluntary Arrangements (IVAs) and CVAs are almost identical. However, a protocol exists that simplifies the process for an IVA comprising consumer-based debts.

When most of the debt has been acquired through regulated credit agreements such as bank loans and credit and cards, creditors are automatically compliant and must have a good reason to reject the IVA.

Pros and Cons

It’s important to ensure the terms of the Individual Voluntary Arrangement are right for you. Each proposal is different, and in many instances the monthly contributions could be significantly lower than what creditors propose.

Many Individual Voluntary Arrangements fail to survive the duration, and as a consequence bankruptcy becomes inevitable.

To avoid this happening to you, never enter an IVA without 1st seeking professional, independent advice to guide you through the proposal stage.

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Applying for an IVA

To apply for an Individual Voluntary Arrangement, you must approach an insolvency practitioner (IP) to facilitate the agreement. IPs are known as 'nominees' before the proposal is agreed and 'supervisors' afterwards. Your IP will help you calculate how much and how frequently you can afford to pay. Part of their job is to collect money from you before distributing those funds equally among your creditors.

If you're unable to pay off all of your debts, the rest will be written off as an act of 'debt forgiveness'. The Individual Voluntary Arrangement commences after creditors representing at least 75% of the total debt value agree to the proposal.

If you fail to keep up with your repayments, the supervisor will terminate the agreement and you could be made Bankrupt. You should consider whether an IVA or an alternative such as bankruptcy is the best option for you. Contact I&L today for independent advice, or to find out if the terms of your Individual Voluntary Arrangement are practical and appropriate for your situation.


Length of an IVA

The maximum term for an Individual Voluntary Arrangement is usually 5 years. However, the agreement could be completed sooner if:

  • Your financial circumstances improve
  • You're able to increase the amount paid out to creditors

Someone who pays creditors 40% of what's owed at the start of the IVA may be able to pay 70% after receiving a pay rise or if a dependent gains full-time employment.


Equity in Your House

If you enter an IVA and have a property that increases in value, creditors may try and force you to release any equity for their benefit when the agreement ends. Before voting to approve your Individual Voluntary Arrangement, a savvy creditor who anticipates the equity in your property will grow from £20,000 to £50,000, might say:

"We'll approve your Individual Voluntary Arrangement. But we'd like to make some modifications to the proposal, including a provision stating that at the end of the term, you'll either pay creditors £30,000, or sell the property."

An IP may not advise you of this situation in the hope they eventually gain control of the property. Secretly, they'll anticipate that you continue paying the mortgage and growing the equity, but fail the IVA just before the agreement ends. In these circumstances, a supervisor can:

  • Petition for you to be made bankrupt
  • Become the trustee of your bankruptcy
  • Gain access to the equity in your house.


I&L can support you through the process of an Individual Voluntary Arrangement. We'll advise as to what's in your best interests, and recommend a commercially-minded IP to facilitate the procedure. Call 020 7504 1300 now for free and confidential advice…

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