How IVAs work
An individual voluntary arrangement (IVA) is an agreement between you and your creditors to pay all or part of your debts. You make regular payments to an authorised debt specialist called an ‘insolvency practitioner’ (IP). They share this money out between your creditors as agreed in your IVA.
Generally the unsecured debts must be at least £15,000 but this does depend on the individual creditors. There is no maximum or minimum level of repayments, except what is acceptable to your creditors. Your IVA usually ends when the agreed amount has been repaid
Benefits of an IVA
Benefits of an IVA include:
- your IP can help you work out how much you can afford to repay
- your IP will contact all your creditors and get them to agree to your IVA for you
- your creditors can’t take any action against you – for example, taking you to court or making you bankrupt
- interest and charges are usually stopped
While your IVA is being set up, your IP might be able to get the court to issue an order preventing your creditors taking further action against you.
Get free debt help and advice
You should get free and independent advice about IVAs and if they are the best way to deal with your debt problem.
The costs of an IVA
An IP will charge a fee for negotiating with your creditors and managing your IVA.
Make sure you understand the full costs of your IVA before entering on one. If you need help, get free advice from an organisation like Advice NI.
How to get an IVA
Only an IP can set up an IVA and you have to prove to them that you can afford to make regular repayments. There are five steps to get an IVA.
Contact a free and independent debt advice organisation to make sure the IVA is suitable for you.
If an IVA is suitable for you then get an authorised IP to act for you. They will help you prepare your IVA and send it to your creditors.
Your IP will help you prepare your IVA. You must provide details about:
- your assets and income which can be used to pay your debts
- your expenses – for example, household and food bills
- your debts – for example, how much you owe including any interest or charges
- your creditors – you must provide a full list, any missed out can apply to the court to have your IVA cancelled
Your IP will arrange a meeting with your creditors to accept your IVA and will represent you. If creditors who hold more than 75 per cent of your debts accept it the IVA will apply to all your creditors.
If your IVA is accepted, the IP will act as your IVA supervisor. This means they will manage your payments to your creditors, distributing them as agreed.
Your responsibilities when the IVA starts
If you don’t keep up your monthly payments, your creditors can cancel your IVA. If your IVA is cancelled your creditors can take further action against you. They may take you to court or make you bankrupt.
Let your IP know if your financial situation gets worse, for example, if you lose your job. They may be able to get your creditors to agree to lower monthly payments.
How an IVA affects your credit rating
Your IVA will be listed on the Individual Insolvency Register, an online database used by credit reference agencies to update your credit rating. It’s harder for you to open new bank accounts, get loans or buy on credit if you have an IVA.