IVA Forum Questions and Answers

Read our questions and answers to get the information you need about IVAs.

1) What is an IVA?

An IVA (Individual Voluntary Arrangement) is a formal debt solution designed to allow you to repay your debts without having to enter bankruptcy.

It is a legally binding agreement between you and your unsecured creditors in which you will be required to make payments to your IP (Insolvency Practitioner) for a set period of time (usually five years).

If your creditors agree to the terms of the IVA, they will not to take any legal action against you while your IVA is underway, and will write off any debt that’s left at the end of the agreement.

2)    How do I know if an IVA is actually right for me?

In general, an IVA would only be suitable for you if:

a)    You owe two or more unsecured lenders a total of £15,000 or more, and
b)    You can’t afford to repay your debt within a reasonable period of time, but
c)    You can commit to making regular reduced payments for the duration of the agreement.

3)    How do I go about entering an IVA?

First of all, you should contact an Insolvency Practitioner (IP) to discuss your financial situation. They will help you explore any options available to you, and if an IVA seems like the best way for you to repay your debts, they will talk you through exactly what would be involved if you entered one.

If you do decide to enter one, you will work with your IP to draw up an IVA proposal – which will tell your creditors what you could actually afford to pay each month without using the money you need for your day-to-day essential costs (like mortgage/rent, utility bills, food, petrol, etc.).

If your creditors accept the proposal, the IVA will begin.

4)     How much will I be required to pay each month?

Your payments will be based around what you can actually afford after your essential costs have been covered, but the ’standard’ monthly payment is usually no lower than £200.

5)     Who actually pays my IVA fees?

When you make your payments, you will make them to your IP (Insolvency Practitioner). This money will be put towards a ‘creditors pot’, and subsequently distributed amongst creditors at set intervals according to how much you owe each of them. This will go on for the length of the agreement (usually five years).

The fees you are required to pay your IP will be taken out of this pot, as are the fees your creditors may have to pay your IP for their services.

6)     Do 100% of my creditors have to agree before my IVA can go ahead?

No. Although all your creditors will be invited to vote, only voting creditors accounting for at least 75% of your total unsecured debt have to agree to the proposal for the IVA to start.

If it is approved by this proportion of your creditors, the IVA will start and all your creditors will be bound by the terms of the agreement – even the creditors who didn’t vote/chose to vote against it.

7)      What happens if my creditors don’t agree?

As you may be aware, for your IVA to go ahead, voting creditors accounting for at least 75% of your total debt have to agree to the terms in your proposal. However, in some cases, your creditors won’t agree – but if it is looking like this may happen, your creditors may suggest changes to your proposal during the negotiation stages so you can still come to an agreement.

8)      Can an IVA write off all of my debts?

Technically, the answer to this question is no. An IVA, once completed, can write off the portion of your unsecured debt (personal loans, store cards, overdrafts, credit cards, etc.) that you cannot afford to repay.

Although it won’t touch your secured debts, an IVA can certainly help you stay on top of these: your IVA payments will be set at an affordable level, making sure you are left with enough money to cover your essential costs (mortgage/rent, utility bills, food, clothes, etc.).

9)      What happens if I lose my job during my IVA?

If you lose your job – or your circumstances change – while your IVA is in progress, and it affects your ability to keep up with your payments, the IVA may fail, and you may even end up being declared bankrupt.

However, IVAs are designed to offer some flexibility – so if you do experience some difficulties while on your IVA, your creditors may accept a few changes to the terms, rather than abandoning the agreement altogether. For example, they may agree to accept lower monthly payments for a longer timeframe.

As with the original IVA proposal, though, any variation to the terms must be accepted by creditors accounting for 75% or more of the debt.

10)      What will happen to my home?

Unlike bankruptcy, an IVA is highly unlikely to force the sale of your home. However, you may be required to release some of the equity in your home during the 54th month of the agreement.

11)     What happens when my IVA ends?

Upon successful conclusion of your IVA, your outstanding debt will be written off and you will be legally debt free.