Individual Voluntary Arrangement (IVA)

Contents

Overview

Application must be through a licensed Insolvency Practitioner. You will need to check that the firm does not charge up front fees.


You can source an Insolvency Practitioner by using the Gov UK Find an Insolvency Practitioner search


Make sure that you get free debt advice to explore all your available debt options before committing to an IVA.

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.


Creditors Voting


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.


Joint Debts


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.


It might not be necessary for a couple to both apply for an IVA, it might be more appropriate to apply for different debt solutions with different terms.


Choosing an Insolvency Practitioner


Never go directly to an Insolvency Practitioner firm before speaking with a free dent advice provider. You must be sure that an IVA is the best debt solution for you before you make any commitments to proceed. A debt adviser can then help you find an Insolvency Practitioner who won't charge you up front fees.


Fees


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.


Benefit Only Income


If you do not have any assets to protect & only have benefit income, it is unlikely an IVA will be appropriate debt option. Insolvency Practitioners can refuse to put forward IVA proposals that are inappropriate.

Is an IVA right for you?

Although regulators have put some measures in place to regulate the IVA sector, there are still concerns among the free debt advice sector with regard to consumer detriment and problems in the IVA market. 


It therefore falls on your individual responsibility to get FCA Regulated advice on all of your debt options before considering an IVA as your best debt option. 


There are a number of lead generating firms using 'paid for' adverts on the internet to promote IVA's, most of them are not FCA authorised due to a loophole in the FCA regulation. This means you might be rushed into an IVA before exploring all of the other debt solutions carefully. 


Unauthorised firms have not passed the rigorous assessment process of the Financial Conduct Authority, and therefore might not have the appropriate skills and professional qualifications to advise you fully.


Many free debt advice organisations, such as Money Advice Hub, often deal with IVA complaints. Mostly these have arisen, because of poor advice practices at the front end of the advice process, but these can manifest during the IVA too. 


Common issues identified are:

Incorrect financial statements showing more disposable income than is manageable.


Not properly advised about windfalls, overtime and bonuses.


Failure to undertake income maximisation, and identify qualifying welfare benefits.


Not dealing with priority debts properly, and further priority arrears accruing during the IVA.


IVA repayments paid instead of rent and council tax due to IVA supervision pressure.


Another debt solution, such as a debt relief order, is more suitable.


Failure to provide appropriate advice on a hire purchase agreement.


Unfair, and even unlawful modifications added to a proposal at the creditors' meeting.


Increases to the IVA repayment, without full consideration to a cost of living offset.


Interlocking IVA's for couples, whereby the partner was eligible for a debt relief order instead.


Exaggerated disadvantages of bankruptcy and debt relief order.


Please visit our web page on 'Problem IVA's'


Recommendation: Please make sure that you have been advised by an FCA regulated firm before proceeding with an IVA. An IVA can be the best debt option for some indebted people, but it is a formal contract that usually lasts a minimum of 5 years, and therefore needs a lot of explanation before committing to it.

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