Individual Voluntary Arrangement (IVA)
An Individual Voluntary Arrangement – IVA is a formal agreement between you and your creditors where you will come to an arrangement with people you owe money to, and make reduced payments towards the total amount of debt outstanding. You will pay off a percentage of what you owe then generally after a 5 year period your debt is classed as settled. Due to its formal nature, an Individual Voluntary Arrangement has to be set up by a licensed professional called an Insolvency Practitioner.
The purpose of an IVA is it is a legal binding agreement between you and your creditors (people you owe money to) It helps those in financial difficulties to make a formal proposal to settle their debt. Monthly payments are based on an affordable disposable income. Once the final payment is made any outstanding debt is legally written off. The arrangement can write off up to 65% of your debts (subject to your circumstances)
How does an IVA Work?
Debts are settled within a reasonable and fixed period of time this is normally a five year period. Any interest and debt charges will be frozen, bailiff, disconnection or bankruptcy petitions will be prohibited from demanding further payments or legal actions.
Once a decision has been made that an Individual Voluntary Arrangement – IVA is right for you, you will be asked questions regarding your current financial situation. Based on the information you have been given, a repayment amount will be agreed with you.
An application may then be to the court for an Interim Order. Once this is in place, no creditors will be able to take legal action against you. You may be asked to attend your creditors meeting but this rarely happens.
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For an Individual Voluntary Arrangement to be approved, creditors will be called upon to vote either for or against the arrangement. If only one creditor votes for the Individual Voluntary arrangement – IVA will be approved. However, if only one creditor votes against the IVA and they represent less than 25% of your total debt, the meeting will be suspended for a later date and other creditors who did not vote will be called upon to do so.
If the creditor who voted against the Individual Voluntary Arrangement – IVA represents more than 25% of the total debt you owe the IVA will fail. This is because an Individual Voluntary Arrangement will only ever be approved if 75% in monetary value is voted for. If any of the creditors don’t vote on the meeting date they still will be bound by the IVA if it is accepted by your voting creditors. The IVA will be legally binding. As long as you keep up the repayments, when the term of your agreement is finished, you will be free from these debts regardless of how much has been paid off.
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