What is an IVA or Individual Voluntary Arrangement?
An Individual Voluntary Arrangement or IVA is a formal agreement between you and your creditors that is designed to help you manage your debts. This is an agreement commonly sought by people who may be struggling to balance debt owed to several different creditors at once.
An IVA can be set up and proposed by an insolvency practitioner, who will act as a third party and middleman for any contact with creditors who may be pursuing you.
How does an Individual Voluntary Arrangement take place?
With the help of a licenced Insolvency Practitioner (IP), an assessment of what you can realistically afford to pay will be proposed to your creditors. Insolvency Practitioners are not only accountants but are highly qualified financial experts who specialise in insolvency law. They must adhere to all the legal requirements that envelop IVAs and ensure that each IVA is conducted along the terms laid out in the IVA proposal.
Although it is not always guaranteed that your creditors will approve your IVA, most creditors will look favourably on your proposal as long as it contains your best offer. Once at least 75% in terms of value of your creditors agree to such arrangements, which are very common, you will then be expected to pay an agreed monthly amount to the third party in lieu of rising debts elsewhere. Your debt and all the future interest will be frozen at the time that the IVA proposal is agreed. Moreover, if you stick to the agreement you’ll get protection from your creditors taking further action against you and some of your debt will be written off.
An IVA arrangement can be long term. The agreed period of time for paying back varies between 3-7 years, with 5 years being most usual . You will work out a repayment plan with the insolvency practitioner. Your monthly repayments will be paid directly to the insolvency practitioner and they are the ones who will distribute the money to your creditors.
What are the benefits?
An IVA is a great way to consolidate anything you owe into one easy payment each month. Some benefits include:
- Legally protects you from bailiffs
- Stops harassment from your creditors
- Stops attachment to earnings
- Avoid bankruptcy proceedings
- Write off remaining debts & get debt free
Factors to consider
IVAs can be flexible to suit your needs but there are risks to consider, thus, this agreement helps individuals not only clear debt but can also help them to understand how to avoid such situations in future. Some factors to consider are:
- If you enter into an IVA, your savings and personal pension payments will usually be used to pay your creditors.
- If you own a home, any equity in your property will be taken into account as part of your arrangement.
- The insolvency practitioner can make you bankrupt if you don’t keep up your repayments.
What happens at the end of an IVA?
At the end of the agreed period, a completion certificate is given to you by the insolvency practitioner. A copy may be passed to the Insolvency Service so that the record of your IVA will be taken off the insolvency register. Moreover, any debt you could not afford to repay is written off provided you have kept up with the negotiated monthly IVA payments.
Albert Goodman is one of the largest accountancy and business services firms in the South West, with offices in Taunton, Yeovil, Chard, Weston-Super-Mare, Bridgwater, Weymouth, Wedmore and Burnham-on-Sea. We are one of very few accountancy firms to have a specialised Insolvency department headed up by an experienced Insolvency Practitioner.
We provide accounts, accounting software and support, audit, and assurance, bookkeeping, business support services, business recovery and insolvency, corporate and personal tax, corporate and personal financial planning, corporate finance, litigation support, payroll bureau & VAT services.