Individual Voluntary Arrangement (IVA)

Overview

  • Application must be through a licensed Insolvency Practitioner, we can refer you to our approved IVA panel of Insolvency Practitioners, they do not charge up-front client fees* & work with us to maximise positive outcomes & minimise duplication
  • No up-front fees* (usually, but check*)
  • Partial write off usually after 5 to 6 years, sometimes sooner with lump sum IVAs
  • Debts usually > £7000 (can be lower depending on your individual circumstances)
  • Property protected (IVA Failure can place your property at risk again)
  • Regular income or satisfactory cash forecast or lump sum from third party or redundancy (can be all benefit income or self-employed)
  • Monthly disposable income minimum > £50 but will depend on dividend payable to creditors & other factors. Stepped payments starting at nil are possible. The offer has to be considered your 'best offer' by voting creditors.
  • HMRC Tax returns must be filed up to date
  • Income Tax included in the write-off
  • Can usually keep hire purchase vehicles, with a few exceptions
  • Your bank account must not have an overdraft facility during the IVA, you may need to change the type of account you have
  • Creditors are bound in if majority vote yes to proposal (75% ratio of the debts that vote at the meeting of creditors)
  • Affects credit rating for 6 years & may affect access to credit after 6 years due to low credit score
  • Entered on the Public Individual Insolvency Register

How it works

A licensed & regulated insolvency practitioner will prepare, negotiate & administer an arrangement for you to voluntarily repay your creditors. This may be done by using your spare income on a monthly basis, a lump sum or other assets that you own.


If you have a reasonable surplus income after meeting your essential household & personal expenses, or have assets that can be used to pay your creditors or have access to a lump sum, for example from a relative, an IVA may be appropriate. Doing this will protect you from recovery action that your unsecured creditors may take, & 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, at the moment this is 75% (% share of the total indebtedness) of creditors that vote at the meeting of creditors. Creditors will also compare the amount they would receive (the dividend) from an IVA proposal to the amount they would receive from bankruptcy. This means that if you have a lot of equity or assets, creditors may reject your proposal.

If you have joint debts, you can propose an interlocking IVA. Each party has an IVA, but the repayment is calculated & paid as one monthly payment. Each IVA will need to be approved at a creditor meeting.

Money Advice Hub can advise you fully on the IVA option & is able to recommend one our approved Insolvency Practitioner panel.

Fees are offset by your creditors from your IVA pot, the amount you are able to offer to repay towards your debt. You do not need to pay any fees up-front Fees usually comprise of a nominee (set up) fee , a supervisor fee & disbursements. A nominee fee is generally either £1000 or 5 x your 1st 5 instalments. The supervisor fee is the remaining 15% of realisations (your payments). Disbursements are itemised admin associated costs, such as software, postage, insurances & other welfare services. A lump sum IVA will incur less fees as it is usually completed a lot earlier than a repayment IVA.

If you do not have any assets to protect & only have benefit income, it is unlikely an IVA will be appropriate.

Pros

  • Your IVA is entered on a public register & will affect your credit rating for a minimum of 6 years
  • Some tenancy agreements do not allow a tenant to have an IVA, it is always advisable to check
  • Some insolvency practitioners may require payment in advance for preparing your proposal and getting your creditors’ agreement
  • If there is some equity (value) in your home after taking account of the mortgage(s) on it, you may be asked to obtain quotes to remortgage the property. It is often difficult to remortgage a property once you have been subject to an Insolvency solution, alternatively you may have to continue making monthly or quarterly payments from your income, for up to another year. Please contact Money Advice Hub for further advice.
  • If your circumstances change, & 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, & a proportion of the Insolvency Practitioner’s fees, less whatever has been paid to them under your IVA.
  • If you come into a lump sum of money, a windfall, the Insolvency Practitioner will expect payment which could amount to all of your original debt plus fees. For example, if you decided to cash in a pension pot early, this would be considered a windfall.
  • If your IVA fails, you could be made bankrupt, although these circumstances are not common. If you own assets such as a home, your property could be placed at risk. A good Insolvency Practitioner will always try to avoid this circumstance.
  • Charity Trustees will be disqualified during the IVA, a disqualification waiver can be applied for, find out more here. Some other professions may be affected.
  • An IVA is a legally binding agreement, you should be sure that you understand & agree with what is being proposed before signing.
  • You can add debts left out of the IVA, but only under certain circumstances.
  • Modifications (further obligations) can be added to the IVA proposal at the creditor meeting stage, it is important to understand what further obligations are being proposed before agreeing to them and being bound in.

Cons

  • Your IVA is entered on a public register & will affect your credit rating for a minimum of 6 years
  • Some tenancy agreements do not allow a tenant to have an IVA, it is always advisable to check
  • Some insolvency practitioners may require payment in advance for preparing your proposal and getting your creditors’ agreement
  • If there is some equity (value) in your home after taking account of the mortgage(s) on it, you may be asked to obtain quotes to remortgage the property. It is often difficult to remortgage a property once you have been subject to an Insolvency solution, alternatively you may have to continue making monthly or quarterly payments from your income, for up to another year. Please contact Money Advice Hub for further advice.
  • If your circumstances change, & 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, & a proportion of the Insolvency Practitioner’s fees, less whatever has been paid to them under your IVA.
  • If you come into a lump sum of money, a windfall, the Insolvency Practitioner will expect payment which could amount to all of your original debt plus fees. For example, if you decided to cash in a pension pot early, this would be considered a windfall.
  • If your IVA fails, you could be made bankrupt, although these circumstances are not common. If you own assets such as a home, your property could be placed at risk. A good Insolvency Practitioner will always try to avoid this circumstance.
  • Charity Trustees will be disqualified during the IVA, a disqualification waiver can be applied for, find out more here. Some other professions may be affected.
  • An IVA is a legally binding agreement, you should be sure that you understand & agree with what is being proposed before signing.
  • You can add debts left out of the IVA, but only under certain circumstances.
  • Modifications (further obligations) can be added to the IVA proposal at the creditor meeting stage, it is important to understand what further obligations are being proposed before agreeing to them and being bound in.