Individual Voluntary Arrangement (IVA)

 

Type of Terms	When would this be suitable?
60 affordable monthly contributions	You live in rented accommodation or you have little equity in your property
60 affordable monthly contributions plus extra sum paid at the end of IVA in lieu of equity in residential property or 12 extra contributions if you cannot raise an extra sum	You have an interest in your property which after deducting 15% from the value of your property and your secured debt, the balance is £5,000 or higher.
6 – 12 month IVA offering lump sum	You cannot afford to make monthly contributions but there are friends, family, etc who can introduce a lump sum
Proposal which offers lump sum and contributions	You are likely to retire in 2 to 3 years and can pay contributions prior to retirement but then can introduce a lump sum from your pension
Proposals which offers contributions plus funds from the sale of an asset	You are self employed and are able to sell an asset, introduce the funds and pay contributions for a period.

As you can see an IVA could suit your circumstances. There are likely to be other options as well such as Debt Management, Bankruptcy, Debt Relief Order, Consolidation through refinancing and Dealing Directly with your creditors.

It is important that a detailed review is undertaken and that the advice given is independent. The Debt Advisor is regulated by The Financial Conduct Authority for debt counselling As such we are appropriately regulated to offer advice on both formal and informal solutions.

Once it has been agreed that an IVA is the most suitable solution for you, your offer is detailed in a document called proposals. The proposals set out in detail the following:-

• Background information and how your situation arose
• Your assets including your residential property, cars, etc
• Your secured Debts (mortgage, secured loans, Higher Purchase)
• Your unsecured debts (credit cards, loans, tax debts, etc)
• Your proposals to creditors. For example 60 monthly contributions of an affordable sum.
• How your IVA is to be supervised and your obligations
• What happens if you cannot keep to the terms
• The fees to be charged
• How much creditors are likely to be paid

If your assets are at risk because of action taken by creditors, we can apply to court for an Interim Order. This means that creditors cannot commence or continue with any action against you and your assets unless the court permits them to do so.

A meeting is then held with your creditors where they are able to vote on whether to accept, alter or reject your proposals – 75% of creditors must agree to the proposal in order for the IVA to go-ahead. As long as your proposal demonstrates a genuine desire to repay as much of your debt as you can afford, it is likely that creditors will accept your IVA. It is our role to guide you on what creditors will find acceptable.

Once your IVA is approved all interest and charges on your unsecured debt is frozen. If creditors accept that you can only repay a proportion of your debt, the balance of your debt will be written off as long as you keep to the terms of your agreement. You will need to justify expenditure that exceeds these guidelines.

Our case studies provide a number of real-life examples of how we have used the IVA procedure to assist customers with serious levels of debt. For more information on the detail please visit the FAQ section of this site which details important questions on all appropriate debt solutions.

You may also wish to visit our Debt Calculator page to assess your current financial situation.

Important Information

All debt solutions should be very carefully considered. Our team will provide you with the most appropriate advice taking into account your circumstances. There are a range of options which include IVA, Debt Management, Bankruptcy, Debt Relief Order, Debt Consolidation through refinancing and Dealing Direct with your Creditors all of which are covered on this site.

Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. You have the right to a cooling-off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. Calls to our free phone number from mobile phones and other networks may be charged.

The Insolvency Service website has helpful information on https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty.

The Debt Advisor Ltd is regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. IVA’s do need to be carefully considered and you must take independent debt advice. Your credit rating will be affected for up to 6 years after the IVA is approved. Please be aware that all IVA’s come with a fee and a breakdown of these fees will be clearly explained to you before entering into the solution. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.

A full and final settlement IVA is a legally binding arrangement with your creditors that allows you to repay a proportion of your debt in a one-off lump sum payment.

Normally the lump sum is raised by remortgaging your property or introducing a lump sum from relatives. For individuals over retirement age, an equity release scheme may be possible although we would recommend you only consider Equity Release Schemes after taking advice from FCA regulated pension advisor.

Full and Final Settlement IVA Example

Anthony had amassed £76,586 of debt having gone through a tough divorce. He had been made redundant from a well paid job and after settling his solicitors’ costs, he had £11,000 remaining. Anthony was looking to set up as a business consultant and at the time his income was erratic.

The TDA team helped put together an IVA proposal which offered £11,000 to settle his debts. Anthony also agreed that if he was entitled to any compensation from mis-sold PPI this would also come into the IVA.

	Bankruptcy	IVA
Income Contributions	Nil	Nil
Balance of Redundancy Funds	£11,000	£11,000
Estimated total Costs	£11,000+	£2,265
Dividend to Creditors	Nil	12.17p

This is an ideal solution for individuals who are able to raise a sum of money, but after providing for their reasonable costs of living including their increased mortgage payment, do not have any surplus income. Or alternatively, the settlement comes from a third party and this money would not be available in bankruptcy. Read our case studies for examples of how IVA’s have been used to deal with problem debt.

Creditors are likely to accept your full and final settlement if we can demonstrate that this offers a better return than bankruptcy. Also for people who have reached retirement age, it is possible to retain much of your equity and offer a lump sum (raised either from 3^rd parties, or equity release or pension release) to settle your debts.

The process is much the same as for a normal IVA but usually last for 12 months or less.  If your assets are at risk because of action taken by creditors, we can apply to court for an Interim Order, which means that creditors cannot commence or continue with any action against you and your assets unless the Court permits them to do so.

A meeting of your creditors is held and creditors are able to vote on whether to accept, alter or reject your proposals. As long as you proposals demonstrate a genuine desire to repay as much of your debt as you can afford, it is likely that creditors will accept your IVA. It is our role to guide you on what creditors will find acceptable.

Once your IVA is approved all interest and charges on your unsecured debt is frozen. Also due to the fact that an IVA allows you to repay a proportion of your debt, then as long as you adhere to the agreed terms, the remaining balance of your debt will be written off.
Any charges for progression of an IVA are approved up front with yourself and your creditors. It’s vital that you can achieve the proposed terms as failure to do so is likely to mean your IVA will fail.

A failed IVA usually means that you are once again liable for the debt not settle by the IVA. Generally creditors do not want the Supervisor to petition for your bankruptcy but if you have HMR & C as a creditor they generally request the Supervisor petitions for your bankruptcy if the arrangement fails.

Fees payable for a Full and Final IVA

It takes around 6 – 8 weeks to set up an IVA. If you are offering a full and final settlement, it is likely that we will require that our Nominee’s fee is paid during this 6 – 8 week period. If your IVA terms are not approved, the Nominee’s fee is not refunded.  It is not in our interests to take a fee from you unless we are very confident your IVA terms will be accepted. If there is a danger creditors may not agree the terms, you will be advised of this in writing and we will want to you confirm in writing  if you want us to continue to help you put forward full and final terms for an IVA.

The Nominee’s fee will vary depending on the complexity of the IVA but typically are between £1,000 and £2,000 and as mentioned above, this is paid prior to approval of the IVA. The Supervisory fees are normally capped by creditors at between 15 and 20% of realisations.  The fees will be taken from the full and final sum and the balance will be distributed to creditors. All fees will be discussed in detail with you prior to any plan being put in place.

Effect on your credit Rating

An IVA will be on your credit record for six years which is the same length of time that any other adverse credit is recorded.

The next step

All debt solutions should be very carefully considered. Our team will provide you with the most appropriate advice taking into account your circumstances. There are a range of options which include IVA, Debt Management, Bankruptcy, Debt Relief Order all of which are covered on this site.

The Insolvency Service website has helpful information on https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty.

Important Information

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. Calls to our free phone number from mobile phones and other networks may be charged.

Is an IVA suitable for me?

An IVA could be appropriate for you if you are struggling to make the monthly payments that creditors expect. The most compelling benefit of an IVA is that you pay monthly affordable payments for a 5 or 6 year period with the unpaid balance being written off when the IVA is successfully completed. The starting point for working out whether an IVA is appropriate is working out an “affordable” monthly payment would be and also how much you owe to your unsecured creditors.

Examples of unsecured creditors whose debt can be included in an IVA are:

• Credit cards and loans
• Debts owed by you and someone else “jointly owed”
• Monies owed to individuals including friends and family
• Debts due to HMR & C including overpaid benefits, self assessment tax, VAT
  Arrears of council tax and utilities
• Trade creditors who supply you if you trade as self-employed
• Shortfall once a property has been repossessed

Debts that cannot be included in an IVA include:

• Matrimonial debt – monies owed to an ex-husband or wife that a court has decided should be paid
• Student debt
• Court fines or fines for traffic violations

Our debt calculator will help you work out how your “affordable” monthly payment compares with the amount creditors want.

For full debt advice and whether an IVA would be your best option, you can also speak to one of our advisors.

Can an IVA stop action by creditors?

Yes but it depends on the action and how far it is has gone. We can apply for an “interim order” which prevents creditors from starting or continuing action against you. This includes writs, judgments, charging orders, liability orders and petitions for bankruptcy. It is vital if you are facing action to get in touch immediately. If you leave it too late, we might not have enough time to help you obtain an interim order before the debt becomes charged on your property or you end up bankrupt.

If you are made bankrupt and you have assets that are risk of being sold by your Trustee in Bankruptcy, it is possible to propose an IVA and if this is agreed by your creditors, your bankruptcy can be canceled. You will need specialist debt advice on whether this is possible.

IVA’s – The benefits and the risks

Finding the right solution is only possible if a clear picture is available of the short term and long term advantages and disadvantages of an Individual Voluntary Arrangement. An IVA is aimed at getting your unsecured debts paid off in a manner that is affordable but it is a formal and legally binding solution. An IVA is not easy and requires discipline. The Advantages and Disadvantages explained below can help you decide if an IVA is right for you.

The protocol aimed to simplify the IVA process, but particularly to help make the process as fair as possible for both consumers and creditors.

The protocol terms and standard conditions are reviewed by an independent committee, The IVA Standing Committee who ensure that Protocol Compliant IVA’s remain fair and workable.

The Debt Advisor uses the Protocol terms for consumer IVA’s. We also use protocol terms for IVA’s for self-employed however, generally, these IVA’s are not protocol compliant. See the protocol here.

Guidance to support the IVA protocol

To view the R3 standard Terms and Conditions, please click here.