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What is an IVA?
IVA stands for Individual Voluntary Arrangement and is a legal agreement between you and your creditors, where you agree to pay off a portion of your debts whilst the rest will be written off.
An IVA allows you to consolidate all your eligible debts into one monthly payment, so keeping on top of things is much simpler. A licensed Insolvency Practitioner must handle the process, and they deal with creditors on your behalf, so you don’t have to. During the plan, your creditors must freeze all interest and charges.
The amount you pay will be calculated beforehand, so you and your creditors can choose whether to agree.
Take a look at our online IVA Calculator tool to get an idea of how much debt you may be able to write off with an Individual Voluntary Arrangement.
Your personal circumstances will be considered (income/outgoings), and so will your total debt level. The proposal will then include the total amount to be paid, the amount to be written off, and the end date for your IVA.
A typical IVA lasts around 5 years, after which you will be debt-free.
What debts can be included in an IVA?
Not every type of debt can be consolidated into an IVA, so it’s essential to know precisely which ones may be covered and which of your debts you will have to continue paying separately.
What debts can’t be included in an IVA?
You cannot include your ‘secured’ debts in an IVA, and you should keep up regular payments towards these so that you do not accrue further debts.
A few examples of debts that an IVA can not cover are:
Advantages and Disadvantages of an IVA
Not every debt solution is suitable for everyone, so we’ve listed below some aspects that make an IVA a great option and some other essential things to consider.
Read more about IVA Pros and Cons.
What will I have to pay?
The monthly payment that you will make will be based on your disposable income (what’s left each month after your usual living costs) and will always remain affordable, even if things change.
This payment covers your debts, as well any fees related to the IVA, so there will be no additional or hidden charges. Any fees will all be explained to you thoroughly before anything is signed, and they include:
A nominee’s fee
For a further breakdown of what these include, then read more about IVA Costs and Fees.
IVA vs. other solutions
Many aspects make an IVA an excellent option for you to deal with your financial difficulties.
Here’s a quick comparison with a few other options you may come across when looking for debt help.
Bankruptcy or IVA
While both of these options may see you writing off large portions of your debt, there are key differences between going bankrupt and going insolvent (IVA).
Here are a few examples:
Here’s some further information if you are choosing between an IVA or Bankruptcy
Debt Management Plan (DMP) or IVA
Both of these options do allow you to consolidate your eligible debts into one payment; however, some key differences are worth noting:
We have some useful information to consider if you’re looking at a DMP or IVA.
Different types of IVA
There is not just one type of IVA – different options are available depending on your circumstances. We’ve listed a couple of alternatives below so you can understand what’s available:
You can still enter an IVA if you are self-employed. You will still make monthly payments based on your affordability, but it works slightly differently:
You may require credit to keep your business going whilst on the IVA. This can be negotiated in your initial proposal to your creditors, to be agreed on before the IVA commences. Creditors aren’t likely to reject without reasonable cause, but you must keep up repayments for business credit in good time to avoid further financial issues.
A self-employed IVA considers that businesses may have seasonal/varying income, so you are allowed some flexibility. You must provide accurate statements regarding your income and expenditure so that your IVA payments may be adjusted accordingly. You must regularly provide this information to your Insolvency Practitioner so that you only pay what you can afford and avoid any issues with creditors.
An IVA can be negotiated without including debts owed to specific traders if your business is to continue trading with them throughout the IVA. This will be negotiated during the initial proposal period and allow you to continue making separate payments to those traders, so your business will not be compromised.
These may be included in an IVA if you have any joint debts. It’s important to note that if one person enters an IVA but the other doesn’t, it will still impact both credit files.
Instead, if there is an eligible amount of debt between two people, both can set up individual IVAs and include any joint debts. This is subject to creditors agreeing to the merging of debts and terms of the IVAs themselves, but if approved, both IVAs can be covered by only one monthly payment.
Is an IVA right for me?
With any debt solution, it’s essential to make sure you’re making a well-informed decision about what’s right for you.
You must also be able to commit to paying each month’s payment on time and be transparent and honest with your Insolvency Practitioner about any changes in your circumstances to avoid risking your IVA being voided.
No solution will be able to clear your debts overnight – if you stick with the IVA, you will likely be debt-free in 6 years and back on your way to building your credit and moving on financially.
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The first step is the hardest but you’re in the right place – talking with one of our friendly assessors can help get the ball rolling.
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Debt help without judgment
Talk to us about your situation, and we’ll let you know if an IVA may be a potential solution for you.
No Obligation Service
We can carry out a debt suitability assessment, and if you qualify for an IVA we can help put together an application with you. There’ll be no obligation and we’ll be on hand to answer any questions you may have along the way.
IVA Pros and Cons
With an IVA, it’s essential that you consider all the positive and negative aspects before committing to the solution. Understanding all sides of the situation will give you confidence in any decision-making.
IVA Costs and Fees
With Money Advice, our consultations are free whilst determining what solutions you might qualify for. As a debt solution, IVAs involve fees that are only applicable once your plan goes ahead, which are always included in your monthly payment. You can read all about them below.
During your free consultation with us, we will gather details about your financial situation so that we can decide on a figure that works for you, together. For an idea of what you might pay for an IVA and how much you could write off, try using our free online IVA calculator.
Start by finding out if you qualify by answering the below questions
Our team of experts help thousands of families get their finances back on track with an IVA.
*To find out more about managing your money and getting free advice, visit Money Helper, an independent service set up to help people manage their money.
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