IVA

An Individual Voluntary Arrangement (IVA)is a formal, legally binding agreement between you and your creditors to repay part of your unsecured debt through a single monthly payment, usually over five years. It's set up and supervised by a licensed insolvency practitioner. Once creditors approve the arrangement, interest and charges on the included debts are normally frozen, and any debt remaining at the end of the term is written off.

How an IVA works

An insolvency practitioner reviews your income, expenditure and debts, then proposes an affordable monthly payment to your creditors. Creditors representing at least 75% of the debt value included have to vote in favour before the IVA can go ahead. Once approved, it's legally binding on you and on every creditor included, even those who voted against it.

Benefits of an IVA

• Debt consolidation — Combine your unsecured debts into one monthly payment, managed by an insolvency practitioner.
• Interest and charges frozen — Once your IVA is approved, interest and charges on included debts are normally frozen.
• Legal protection while you pay— Creditors included in the IVA can't take further action against you as long as you keep up with the agreed payments.
• Fixed end date — An IVA usually runs for five years, after which any remaining included debt is written off.

Things to consider

• Credit file impact— Recorded on your credit file for six years from the start date, and listed on the public Individual Insolvency Register while it's in place.
• Borrowing restrictions— You need your practitioner's approval to borrow more than £500, and taking on new credit can be difficult generally.
• Not all debts qualify— Secured debts, court fines, child maintenance and student loans can't be included in an IVA.
• Risk of failure— If your circumstances change and you can't keep up payments, the arrangement can fail — creditors could then pursue the full balance, and bankruptcy may become the more likely route.

Who an IVA is for

• Debt level— Most providers look for at least £6,000 of unsecured debt, though this isn't a fixed legal requirement.
• Regular income— You'll need a steady income to make an affordable monthly payment.
• Enough disposable income— Enough left after essential living costs to offer creditors more than they'd likely get if you went bankrupt.
• Not already in another solution— You shouldn't currently be in another formal insolvency arrangement.

Speak to an experienced debt advisor

Everyone's situation is different, and the right debt solution depends on yours. Speak to one of our advisors for free, impartial advice on whether an IVA — or another solution — could work for you.