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In England and Wales, an Individual Voluntary Arrangement (IVA) is a legally binding contract that can help you get out of debt and it’s an alternative to bankruptcy. The contract is set up between you (the debtor) and your creditors (those to whom you owe money) to arrange repayment of your debts, usually as a series of regular repayments over a period of up to around five years. It must be drawn up by a licenced insolvency practitioner, who becomes your ‘nominee’ and represents you to your creditors. You can obtain lists of local insolvency practitioners from your county court. A key advantage of IVAs over bankruptcy is that they put you more in control as it is you who makes the proposals as to how you will repay your debts. While the IVA is in the process of being set up, your insolvency practitioner will help you to apply to the courts for an interim order to try to stop or discontinue any bankruptcy petitions against you by your creditors until the IVA is arranged. Once drawn up by you and your insolvency practitioner, your IVA proposals will be circulated to your creditor(s) to review and either accept or reject. If over 75% of your creditors accept, the contract becomes legally binding. The IVA then comes into force (for all creditors, not just those who accepted the arrangement), managed by your insolvency practitioner who ensures that all the agreed terms and conditions are adhered to. You can then start making the agreed repayments without receiving any more payment demands from your creditors. IVAs can be more beneficial to both you and your creditors than bankruptcy. An IVA is likely to cost you less than bankruptcy and your creditors are likely to receive more of their money than through bankruptcy. IVAs also don’t have the same stigma as being labelled bankrupt and people with IVAs aren’t subject to as many restrictions as those who are bankrupt. However, IVAs too can be restrictive. Your assets could still be at risk as they may have to be sold to raise the funds for you to repay your debts. However, it is you who makes the proposals so you have a degree of control over this. Also, creditors tend to be more flexible with IVAs because they know they should receive regular repayments from you and may not be so demanding in terms of you selling assets such as your home. You may also find it more difficult to get credit with an IVA. However, there are several companies that specialise in providing financial products such as credit cards, loans and mortgages to people with IVAs. With these products the interest rates tend not to be so favourable to you and you may be required to provide a bigger deposit because you are considered more of a risk. However, they can provide access to borrowing that otherwise would not have been available. Although IVAs can be cheaper than bankruptcy, they still cost money. You have to pay the insolvency practitioner’s fees, which can cost anything between £1,000 and £2,000. Normally the insolvency practitioner will require an upfront percentage of the fee as a deposit, while the outstanding balance is usually added to the IVA to be repaid along with your debts. This article is copyright protected and is not for republishing |
