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IVA - Individual Voluntary Arrangement

An IVA (Individual Voluntary Agreement) is a legal agreement between you and your creditors that restructures your debt into affordable manageable repayments so that by the end of the IVA term (usually 5 years) it has been repaid or written off. 

It is available to people living in England, Wales and Northern Ireland. If you are based in Scotland you may find our page on Trust Deeds more useful.

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In this Guide

How does an IVA work?

An IVA puts an end to worries about spiralling interest charges because when you enter an IVA all interest and charges on your debt are frozen so that the amount you owe does not increase.

This debt solution also enables you to avoid bankruptcy and gives you protection against creditors taking legal action against you while you sort your finances in a structured way. That means you no longer need to fear answering the phone or the door to creditors.

An IVA is designed to steadily reduce your debt so that by the end of the IVA period, which is normally five years but can be six, all debts covered by it have either been repaid or written off, leaving you free to make a fresh start.

Instead of juggling unaffordable debt payments to many creditors and having to scrape by every month just to survive, with an IVA you only have to make a single affordable payment and you will be afforded a reasonable sum each month for essential expenditure.

A licensed professional Insolvency Practitioner (IP) will work with you to draw up the terms of your IVA and will handle all direct contact with your creditors on your behalf. The IP will focus on securing agreement to the terms of the IVA from creditors accounting for 75% of your debt - once that is obtained you are afforded full legal protection from creditor action.

You make regular monthly payments at an agreed level to an Insolvency Practitioner (IP) who administers the IVA on your behalf and makes all the payments to your creditors. The IP will detail any fees or charges and explain how these work.

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Step by Step Guide

Step One

Find a professional reputable Insolvency Practitioner, such as Carrington Dean, and have a meeting or call with them to discuss your financial circumstances. Obtain the full facts on all debt solutions open to you from your IP and then make an informed decision on whether an IVA is the right solution for you. You can use our debt calculator to find out an indicative minimum monthly payment for various debt solutions available to you. We request contact details so that we can contact you to go through a full income and expenditure, but there is no obligation to use this service.

You can check that a firm is a member of the Insolvency Practitioners Association at their website.

Step Two

Once you have decided you want to enter an IVA, work with your IP on a detailed list of your income, expenditure and assets. You will need to provide details of all of your outstanding debts, including how much you owe to each creditor. Your IP will then work out a repayment proposal to make to your creditors.

Step Three

Your IP will handle all direct dealings with creditors on your behalf and will present a repayment proposal which, when it is agreed, will become legally binding on all parties - both you and your creditors. Creditors will be asked to vote on the IVA proposal - in order for it to go ahead, Creditors representing at least 75% of your total debts must vote in favour of it. Once the IVA is approved, creditors are unable to take any legal action against you to recover the debt and all interest and charges on the debt will be frozen. Your IVA will be added to the Individual Insolvency Register. It will be removed three months after the IVA ends.

Step Four

Once the IVA is up and running, you are firmly on the road to resolving your debt problems because at the end of the IVA (which is normally five years but can be extended to six), all debts will either have been repaid or written off so you can no longer be pursued for that debt by Creditors. Once a year, the IP reviews your finances and an annual progress report is sent to you and your creditors. At the end of the IVA, your payments will be completed and you will officially be discharged from that debt. 

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What kinds of debt can be included in an IVA?

The kinds of debt that can be included in an IVA are generally unsecured debts such as:

  • bank and building society loans and overdrafts
  • credit cards
  • personal loans
  • store cards
  • home shopping catalogues
  • charge cards.
  • council tax arrears
  • tax debts
  • utility bills

Mortgage debt is unlikely to be included - it is classed as secured debt as your home is held as a security against the debt you owe to your lender. Your IVA will take account of mortgage payments and other essential outgoings such as rent payments, factoring in how much you need to pay each month to safeguard your home.

If your home is worth significantly more than the amount you owe on the property, you may have to remortgage the house to release some of this value in order to repay your debts more quickly.

Individual circumstances vary and whether or not you may have to remortgage your property will depend on the value of your home, how much you owe on it and also whether your credit rating is sufficient to obtain a remortage.

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Advantages 

  • An IVA protects you from any legal action or harassment by Creditors.
  • It freezes interest and charges on your debts so they do not increase.
  • All debts covered by it will be repaid or written off when the IVA ends.
  • An IVA enables you to avoid bankruptcy.
  • As long as you keep up payments, it offers more protection for your home.
  • You only have to make a single affordable payment towards your IVA.

Disadvantages

  • It is a legal arrangement so it you do not stick to the terms of the IVA, you will lose protection from creditors.
  • If an IVA fails, the cost of it will be added to your overall debt.
  • Your IVA will be aded to the Individual Insolvency Register. However only limited details can be accessed and it will be removed three months after the IVA ends.
  • It may affect the terms of your employment or hire purchase agreements.

Why choose Carrington Dean for help with an IVA ?

Carrington Dean group includes one of the UK’s leading independent debt solutions business. Our professional team have extensive experience in finding the right debt solutions for people from all backgrounds and who find themselves in all sorts of stressful financial situations.

We have successfully helped more than 10,000 people in the UK to escape from the misery of unaffordable debt and we have built a reputation as a highly ethical business with a friendly touch. Our clients interests are at the heart of everything we do.

Because we are experts in the full range of debt solutions, including IVAs, we are well-equipped to provide full facts on all of your options so that you can make an informed choice about the solution best suited to your needs.

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Frequently Asked Questions

No there is no minimum or maximum amount of debt that can be included in an IVA.

No, it is highly unlikely that your lender will agree to this as mortgage debt is classed as secured debt, i.e. your home is held in security against the debt. However, the IVA will take account of your mortgage payments when your IP works with you to calculate essential monthly outgoings.

You cannot include any secured loans, rent, Council Tax arrears, court or traffic fines or child support arrears so you will need to tell your IP about these type of debt obligations so that they canbe included in your essential monthly payment budget.

If you can make a case that you need it for work, you are likely to be able to keep it. You may be asked to consider switching to a more affordable car if you have an expensive model. If you have a car loan, this debt may not be included in the IVA as it is ‘secured debt'.

No, you need to do this through a professional Insolvency Practitioner (IP) who will be able to accurately assess your financial situation and also deal with your creditors on your behalf and negotiate the amount of money you will have to pay every month. They will also supervise the IVA for the lifetime of the agreement, collecting a payment from you every month and disbursing payments to your Creditors.

You will pay charges for the administration of the IVA, but it will be included as part of your regular monthly payment and deducted by the IP before the remainder of the money is passed to Creditors.

If you have been struggling to meet debt obligations for some time and have missed payments to Creditors, this is already likely to be reflected in your credit rating. A formal debt solution indicates that you have taken positive steps to resolve your debt.

Details of your IVA will appear on your credit file for six years - a year beyond the normal scheduled end of your IVA. While you are in an IVA you cannot access any more credit or borrow more cash.  At the end of your IVA you should ensure that the UK's three credit reference agencies - Experian, Equifax and CallCredit - are notified that your IVA is now 'complete'. You can do this by sending them a letter signed by your Insolvency Practitioner.

No you are not eligible for an IVA if you are bankrupt or are subject to a bankruptcy order.

If your circumstances change for the worse and you are struggling to meet your monthly contributions, contact your IP who can assess your situation and they may be able to negotiate a payment holiday or a variation to reduce the level of your payments. If your circumstances change for the better and you have more disposable income or inherit or are gifted a lump sum of cash, you need to inform your IP so that this can be taken into consideration and you may be asked to make additional payments towards reducing your debt.

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Carrington Dean

Fyfe Chambers,
105 West George Street,
Glasgow, G2 1PB 

0141 221 2323

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Authorised and regulated by the Financial Conduct Authority. FCA No: 674395

Registered in Scotland, Company Registration No SC 225672. Registered Address: Fyfe Chambers, 105 West George Street, Glasgow, G2 1PB