Individual Voluntary Arrangement
What is an Individual Voluntary Arrangement?
The Individual Voluntary Arrangement (IVA) procedure was introduced by the Government in 1986 as an alternative to bankruptcy; it allows people take control of their debts and negotiate a deal with their creditors leading eventually to a safe and secure financial future free of debt.
An IVA freezes interest on unsecured debts and allows an individual to agree with their creditors that they will repay either all of their debts or a percentage of them over a number of years.
What is the process?
The debtor must make a full disclosure to the Nominee of all their assets and liabilities. The insolvency legislation requires a debtor to prepare the proposal to their creditors with the help of a licensed insolvency practitioner (IP), who is called their Nominee.
The proposal put to the creditors must show that they will make a better recovery by agreeing to the IVA than if the individual is made bankrupt instead. The proposal is confidential and the debtor remains in control of their assets, but the conduct of the IVA is overseen by an IP, who is known during the process as the Supervisor. This is usually the same IP who acted as the Nominee.
An individual can put proposals for an IVA to their creditors if they have already been declared bankrupt or if they have been presented with a Bankruptcy Petition by a creditor. If the debtor is self-employed and has a viable business, they can continue to trade.
What are the payment terms for an IVA?
There are no set rules for an IVA, so there is no minimum or maximum payment percentage and no limit to the duration. Whilst certain creditors such as HMRC have accepted norms that they will tolerate, this process is a matter of negotiation and depends entirely on an individual’s personal circumstances.
Opus is committed to giving the best advice to financially stressed individuals and guiding them in formulating a proposal, which meets the required threshold of being fair, fit and reasonable and, crucially is achievable. Getting this difficult balance right is vital for all concerned.
Opus has a number of IPs, who specialise in personal insolvency, so that we are able to carry out the role of Nominee and once appointed as the Supervisor of the Arrangement.
The pros and cons of an IVA
The advantages
- Flexibility – there is no fixed time limit and no minimum percentage repayment to creditors.
- Potential to write off large amounts of outstanding debt.
- Creditors included in it are bound by the terms of the IVA if it is approved by 75% of the total value of creditors who vote, even if they vote against it.
- Affordable monthly payments, leaving sufficient income to live on.
- All legal action by creditors included in the IVA will be stopped.
- Creditor contact is with the IVA Supervisor, not the debtor.
The disadvantages
- If the IVA fails, you could be declared bankrupt.
- Your credit score will be adversely affected.
- IVAs are recorded on a public register.
- Creditors aren’t obliged to agree to an IVA request but will be bound by it if it is agreed by 75% of the creditors who vote.
- There may be restrictions on your expenditure for the period of the IVA.
- Secured creditors with a charge over your assets such as mortgage lenders cannot be bound by an IVA.
- You may have to release some of the equity in your property for the benefit of your creditors. A re-mortgage to facilitate this may be at higher interest rates. If this is not possible you may have to sell your home or extend the term of the IVA by at least a further 12 months.
- The terms of an IVA may lead to a period when repayments are not made against certain debts, such as loans. This could lead to the debtor falling into arrears or their arrears increasing. Where this possibility exists, the debtor will be told when payments will be made against these debts.
- Only some of your unsecured debts are included and any other remaining debts will still be outstanding. The following debts are excluded and will continue to be payable in full:
- Mortgages
- Debts incurred through fines
- Student loans
- Court fines
- Social fund fines
- Hire purchase agreements
- Child support arrears
Debt advice
The faster you get help, the more options will be available to find a workable solution to relieve your stress and restore your life back to normal as quickly as possible.
You can find information on all options for resolving debts in England and Wales from the Insolvency Service. For debtors in Scotland, assistance in finding debt solutions can be accessed here.
Debt counselling services: Money Helper
Free and impartial debt counselling services are available from Money Helper.
Occasionally, where appropriate, we will refer clients to other agencies such as Citizens Advice Bureau or debt advisory charities. These other sources of advice may be paid by creditors, especially banks to help debtors deal with their financial difficulties. We do not receive any payment for these referrals.
Regulated personal insolvency advice for personal debt and Individual Voluntary Arrangements (IVAs)
For more information on Individual Voluntary Arrangements, we offer an initial free consultation to review the situation and make recommendations on the best way forward. Whilst the initial consultation is free, we are a profit making organisation and as such, if we believe we can assist a fee will be payable.
If we think that an Individual Voluntary Arrangement is the best route forward, our specialists can support the individual at every step of the way through the process. Contact our Head Office on +44 (0) 20 3326 6454 to arrange a no obligation and confidential call with one of our Partners.
For information on fees in relation to Individual Voluntary Arrangements, click here.