Individual Voluntary Arrangement (IVA)

Key facts

How much debt must I owe? Because of the costs involved, it is better if you owe £10,000 or more.

What type of debt? Most debts can be included, except: secured debts (unless your lender agrees), rent, student loans, magistrates' court fines, maintenance payments or maintenance arrears ordered by a court, Child Support Agency or Child Maintenance Service arrears.

How long will it last? ‚ÄčThere is no time limit, but they usually last five years.

How it works

An individual voluntary arrangement (IVA) is an alternative to bankruptcy. It is a formal arrangement to pay an agreed amount off your debts over a shorter period, such as five years, or through raising a lump sum. The rest of the balance you owe on those debts which are included in the IVA is written off.

You will need an insolvency practitioner to set up an IVA. They will charge fees for preparing and running your IVA. The arrangement has to be agreed by the majority of your creditors (75% by value of those who vote).

National Debtline can help you to set up an IVA by referring you to an insolvency practitioner from a list of providers who follow good practice guidelines under the IVA Protocol. Contact us for advice.

Advantages

  • Repayments stop at an agreed date and you will usually pay less than the full amount you owe.
  • You may be running a small business which would be difficult to keep going if you were bankrupt.
  • You may be in a profession where you could lose your job if you go bankrupt, such as accountancy, the police or the armed forces. But be careful, in some professions your employment may be affected by an IVA. Check with your professional body and check your contract of employment.
  • You may have access to a large lump sum and want a formal arrangement with your creditors to accept the lump sum and write off the rest of the debts.
  • You will not automatically lose your house or other assets.

Disadvantages

Extra advice:

bank accounts

Check the terms and conditions of your bank account to make sure that it cannot be affected by an IVA in any way.

  • If you do not keep to the terms of the IVA then the insolvency practitioner (IP) or your creditors can take further action against you, for example by making you bankrupt.
  • If creditors do not accept the IVA proposal, you are back to square one and your creditors can carry on trying to pursue you for your debts.
  • If you paid an up-front fee for your IVA and it is not accepted, then you will have lost the fee and may be in a worse position than when you started.
  • If you own your house, you may need to re-mortgage your home as part of the IVA. If you are unable to do this you may have to pay extra into the IVA, or in rare cases you may lose your home.
  • If you rent your home, check the terms and conditions of your tenancy agreement. It may say that your landlord can end your tenancy if you enter into an IVA. Even if your tenancy agreement does say this, your landlord may choose not to end your tenancy, especially if you are up to date with your rent payments.
  • There is a risk that the IVA is agreed on the basis of monthly payments that you cannot afford over a long time. You must be very careful that the payments are set at a realistic amount in the first place.
  • If your circumstances change and you can no longer afford the payments, your IVA may end if the IP cannot persuade the creditors to accept a new agreement.
  • The IVA will be recorded on your credit reference file for six years and can affect your ability to get further credit.
  • When you set up an IVA, you will need to open a basic bank account which is separate from all your debts. A basic account does not offer any credit facilities, such as an overdraft. Some banks may not allow you to continue to operate a basic bank account whilst you are in an IVA. Contact us for advice.