Individual Voluntary Arrangement

  • What is an IVA agreement?

    If you are someone who has multiple debts of a high value then an Individual Voluntary Arrangement might be well suited for you. An Individual Voluntary Arrangement is a debt solution that is designed to aid you with the repayment of your unsecured debts, such as your payday loans and credit card debts. If you take out an Individual Voluntary Arrangement, then you will form an agreement with your creditor to repay a manageable portion of the balance of your debt over an extended period of time (typically around 5-6 years). At the end of the agreement, provided you have adhered to the terms of the arrangement, even if you have not repaid your debts in full, your debts will be written off. If you are someone experiencing financial difficulties and want to avoid declaring bankruptcy, then contact us today on 0800 955 5020, for expert advice about what an Individual Voluntary Arrangement can do for you.
    • What are the benefits of an IVA?

        • Free from debt in 5 years. IVAs are set up to last for a set period of time – usually around 5 to 6 years, after which your debt will be wiped clear.
        • Single monthly payments. At the start of your arrangement, you will agree with all of your creditors how much you are able to afford to repay each month. You will then begin making one regular payment each month towards this. In some cases you will be able to make a one-off lump sum payment.
        • Interest and charges are frozen once the IVA is approved. Once the IVA is set up, you creditors will not be able to add additional charges or increase the interest on your debt which is covered by the agreement.
        • After approval, creditors will no longer be able to take legal action against you and they will lose the power to petition for your bankruptcy.
        • Telephone calls from your creditors will cease and they will no longer be able to contact you by letter to demand payment from you.
        • The Insolvency Practitioner will take responsibility for your debt repayment. You will delegate responsibility of your financial situation to an Insolvency Practitioner who will be better equipped to produce results and ensure your arrangement is approved.
        • You will be able to keep your home. You will not be asked to sell your property as part of the IVA. You may need to re-mortgage your home to help pay your creditors, but this will only happen after the fourth year of your IVA.
        • You will retain ownership of your vehicle as long as it worth less than £5000.
        • You will not be required to make any further payments to cover the rate of your insolvency practitioner (these can be taken from your monthly payments).
        • Begin repairing your credit rating. After you have finalised your arrangement, the opportunity will be there to borrow additional funds and begin to improve your credit rating. You need not worry about being credit blacklisted indefinitely.
        • Fixed agreement. Once your creditors agree, they will be legally bound by the agreement and will have to adhere to it. This means that you will never have to pay more than you have agreed with them, and they cannot demand more of you.
        • You will have legal protection. Your creditors cannot take you court or take action against you in order to make you pay off your debt faster. This is as long as you act in accordance with the agreement.
      • Your job/occupation will not be affected. Whatever you do for a living, your job will not be adversely affected by taking out an IVA. An IVA is a confidential agreement between you and the creditors to whom you owe your debt. Although you will be on the Insolvency Register, you do not need to inform your employers that you are on an IVA.
    • What are the risks of an IVA?

        • An IVA can take longer than bankruptcy. Although there are numerous advantages to an IVA, bankruptcy will often be a quicker process, taking only one year, unless you happen to have a payment order, which can last up to three years.
        • It will affect your credit rating. Although you will be able to repair your credit rating after your IVA is finalised, and your credit rating will not be damaged as badly is as it would if you were made bankrupt, you will be unable to borrow money during the course of your IVA.
        • You must be disciplined and stick to a regimented payment plan. This can be a positive or a negative. If you fail to adhere to the terms of the agreement made, and continue with your contractual payments, your IVA may fail. The result of this might be that you have to cover the original, full balance of your debt, or possibly facing bankruptcy. However it is possible in some cases to take payment holidays.
        • Court costs, fines and student loans can’t be included. There are certain types of debt, namely priority and secured debt which cannot be covered by the IVA.
        • If you own a property with equity in it, then you will likely be asked to try to remortgage in the final year of the IVA. Such a remortgage is subject to fair criteria, for example this can only be up to a maximum loan to value of 85%, and the repayments to the remortgage can only be up to 50% of the monthly repayments you make. Your monthly repayments will be reduced in-line with this.
        • You must continue paying your rent and your mortgage and all other secured debt payments, or they might be repossessed.
        • Your home equity may be at risk. After the fourth year of your agreement you may be required to take out a mortgage on your property in order to help pay off your IVA.
        • You will be unable to make any unsecured borrowings. Your credit cards will be destroyed. You can potentially however, take out a new mortgage or change your mortgage provider. You can also use prepaid cards.
        • You need £10,000 or more of unsecured debt. If you have less than £10,000 worth of debt then you will not be eligible for an IVA. You will also be required to pay a minimum payment of £120 per month in order to be eligible.
        • You must include all of your creditors. You cannot leave your any of your creditors from the IVA agreement, and you will be unable to make separate arrangements which each creditor – they must all be part of the same agreement. This reduces for your flexibility with repayments.
        • You may have to repay more of your debt than you would with, for example, bankruptcy. With an IVA you may end up paying back between 20% and 50% of your overall debt, whereas with bankruptcy, you may pay less than this or even nothing.

    What criteria do I have to meet to qualify for an Individual Voluntary Arrangement?

    • 10000
      Amount of Debt
    • 120
      Spare Monthly Income
    • 3+

    Your employmentIVA criteria

    To be suitable for an IVA it is ideal for you to be in full-time employment so that you have a sustainable income with which to use to pay back your debt, however it is not essential. You may have other forms of income which you can use to pay off your debt, for example, benefits or a partner who is willing to contribute to your repayments. There are many IVA applications accepted each year from those who are not in full-time employment.

    Disposable income

    It is necessary for you to have a minimum of £100 – £120 of disposable income each month, with which to repay your creditors through the IVA. This should be after all your house hold expenses, bills, and payments toward secured debts have been covered.

    Resident of England, Wales, or Northern Ireland

    An IVA will not be available to you if you live in Scotland, you must be a resident of England, Wales, or Northern Ireland. If you are a resident of Scotland, then you can benefit from a similar debt solution, called a Trust Deed. A Trust Deed works in a similar way to an IVA.


    As IVAs are designed for those who have exhausted other more conventional methods for repaying their debt, it is generally assumed that you do not possess a large degree of valuable assets. For example your car should be below the value of £5000.

    Number of creditors

    IVAs are designed for those who have 2-3 or more creditors to whom they owe money. If you have less than three creditors, this does not necessarily mean that you will not be accepted for an IVA. There is no minimum in this respect, legally speaking, but if you only have one creditor, it is unlikely that an

    will be a viable option for you.

    Amount of your debt

    In order to be suitable for an IVA the amount of debt you owe will need to be a minimum of £10,000 – £15,000 worth of unsecured debt. However, each circumstance is assessed on its own merits, and it is possible for be accepted for a lower amount of debt.

    It is important to understand which debts are covered under an IVA and which are not.

    Which debts can be included within an Individual Voluntary Arrangment?

    You can, and must, include all of your unsecured debts into your IVA. You cannot leave any of your unsecured debts out of the IVA, as all your creditors must be equal within the IVA agreement. Examples of unsecured debts (also known as non-priority debts) include:

    • Credit card debt/ charge card debt/ store card debt
    • Personal loan debt
    • Bank loans and building society overdrafts and loans
    • Catalogues
    • County Court Judgements
    • Payday loans/ doorstep loans/ credit unions
    • Arrears that have come from utility suppliers, electricity, gas, and water
    • Any unsecured debt that has a County Court Judgement or an attachment of earnings
    • Any debt that were secured against one of your assets in the past, which has now be repossessed (e.g. property shortfall)
    • Arrears that have come from service providers (e.g. mobile phones, digita TV)
    • HMRC VAT, self assessed tax, PAYE, and National Insurance & Gas, electricity, water, TV licence, and telephone payments (these are some of the few priority debts which you can include in an IVA)

    So which debts cannot be included within an IVA?

    Priority debts cannot be included in your IVA. These are the debts which cover the cost of your living. Payment for such debts will need to be factored into your monthly budget and paid for before payments to your creditors are made via the IVA.

    The following are examples of priority debts:

    • Rent and mortgage payments
    • Secured loans
    • Child maintenance
    • Student loans
    • Council Tax
    • Maintenance arrears which have been requested by the court
    • Magistrate fines of the court
    • Utility bills
    • Joint debts – if you have debts for which another party is also responsible, your partner for example, then you may not be able to include these within your IVA.

    What should I do about the debts which I cannot Include within the IVA?
    The priority debts which cannot be included within the IVA will be paid for by the monthly household allowance attributed to you, along with all of your other living expenses. This is something that your insolvency practitioner will advise you on. If you would like to speak to an insolvency practitioner for more information regarding this or any other issue regarding IVAs then please call 0800 955 5020.
    Can I make multiple IVA proposals, and what length of time do I have to leave between them?
    This will likely depend on the reason for which your IVA proposal was terminated or rejected in the first place. If the application was not accepted because of an issue such as the timing, then it may be possible to begin a new proposal right away. If the application was rejected because you have had your unsecured debt for only a few months, and your creditors are arguing that you must have had your debt for 12 months before making a proposal for an IVA, then any attempt you make right away will most likely fail as well.
    Can I create a Joint IVA with my partner?
    It is possible to create a joint IVA with your partner. This is done by both you taking out IVAs with are linked and which take into account all joint debts and your joint income and expenses.
    Do I have to tell my partner if I take out an IVA?
    It is not essential to tell your partner that you are on an IVA. You do not need to inform anyone that you have applied for or are on an IVA. It is however recommended that you inform your partner of the fact that you are on an IVA as this can help with any stress experienced with dealing with changes in your financial situation. If you have shared debts with your partner, then you will likely be required to inform your partner that you are going on an IVA.
    When is the best time to apply for an IVA?
    This will differ from person to person, and will depend on your individual financial situation. However in general, as soon as possible is going to be most beneficial. When your proposal for an IVA is accepted, interest charges will be frozen, saving you money. Your creditors will likely agree to a repayment play which involves you paying less than 100% of your debt, maybe even 50% of the total sum, and it is beneficial to have your proposal accepted before your debt increases any further. Your desire to pursue an IVA will underpin how motivated you are to repay your debt, and how organised you are with your finances, which can be a plus for your overall credit rating. The sooner you tackle your debt, the sooner you can begin rebuilding your credit rating, and moving towards a brighter financial future. If you would like to apply for an IVA, call 0800 955 5020.

    How will an IVA affect my creditors?

    Will my creditors want to accept my proposal for an IVA?

    Depending on your current financial situation, you may be unable to realistically repay your creditors the full sum of money which you owe them. Your creditors will be aware of this, and will also be aware that an IVA will give them a guarantee that they will at least receive at least a portion of your debt owed to them. Because an IVA is a legal agreement for you to repay a certain amount of your debt, it gives your creditors a certain degree of security, and therefore may well seem an attractive proposition to them.

    Once my IVA has been approved, will my creditors be able to demand higher payments?

    Your creditors will not be able to change the terms of your agreement. Once it has been agreed that you will repay a certain amount each month, your creditors will not be able to increase this amount or change any other terms of the agreement. Your financial circumstances will be assessed each at the end of each year, and if there are been major changes to your situation, then the agreement can be reviewed, however, if there is no significant change to your finances, then your payments will not change.

    Is it possible for me to arrange my IVA with my creditors directly, on my own?

    In order to complete the IVA agreement, it is essential that you get advice from an Insolvency Practitioner (IP). An IP will make sure that both you and your creditors receive a fair deal, and are qualified to do so. You cannot complete the IVA without an IP.

    Insolvency practitioner

    What happens if not all my creditors agree to the IVA

    For your IVA proposal to be successful, the amount of debt you owe to the creditors who have agreed must add up to at least 75% of your total debt. If this happens, then the remaining creditors who have not agreed to the IVA will have no choice but to agree. To give an example, if you owe £20,000 to 5 creditors, and 2 of those creditors, to whom you owe a total sum of £15,000 to, agree to the IVA, then the remaining 3 creditors will be bound by that agreement.

    What will happen if the creditors that agree are owed less than 75% of my total debt?

    If it is not possible to convince enough of your creditors to agree to the IVA, and they are unwilling to change their minds, then your only option will be to consider an alternative debt solution. An IVA may have been the most financially beneficial option for you, but there other options which may also be viable for you, like a Debt Management Plan, or even bankruptcy. If your application has been rejected and you are unsure of the course of action which is right for you, feel free to speak to an expert advisor on 0800 955 5020.

    Will my interest rates be frozen?

    By law, your creditors will have to freeze your interest rates for the length of the agreement once the IVA is approved.

    Will my creditors still contact me or make demands of me?

    Once your IVA is approved your creditors will stop contacting you as part of the agreement. You will have an Insolvency Practitioner who will act as a mediator between the two of you, and if your creditors do happen to continue contacting you directly to make demands, then you can speak to your IP about this and have the situation resolved.

    Do I have to meet with my creditors in order to set up the IVA

    Once you have begun applying for your IVA with your Insolvency Practitioner, you are advised to attend the creditor’s meeting in order to represent yourself. You can attend the meeting via a conference call if this is more convenient for you. At this meeting, your creditors will be able to look over the proposal and at this point making any requests for changes, and vote on whether or not to accept the agreement.

    What are the fees, charges, and monthly payments with an IVA?

    Are there IVA fees? And who pays them?

    IVA Fees
    You will not be required to pay any fees directly for the IVA application. The way an IVA works, the fees for the services of the Insolvency Practitioner (who is essential for the process) are covered by the funds which are distributed to your creditors .

    How much will my monthly payments be to my creditors?

    The amount which you pay each month to repay your debt to your creditors will be calculated based on your income, your expenses, and other factors, by your Insolvency Practitioner. Your IP will strive to create an agreement which is financially viable for you, so that you can comfortably meet your monthly payments. It is important that you are able to meet all of your priority debts, which are paid outside of the IVA, like your mortgage and utility bills.

    Will I have to live on a tight budget?

    This will depend on your individual financial situation. With the help of your Insolvency Practitioner, you should aim to prioritise your expenses, and take care of those which are most essential to your day to day living. This way you should be able to maintain your monthly payments will also maintaining a relatively comfortable life style.

    What happens if my financial circumstances change?

    If your financial situation improves significantly, then you may be asked to increase the size of your monthly payments. Your Insolvency Practitioner will review your financial situation on a yearly basis, and it is at this time that changes to your monthly payments may be made. Say for example you inherit a large sum of money, or receive a pay-rise at work, then you may be asked to pay more towards your IVA each month (this is as part of the windfall clause). You should let your IP know about your increased income as soon as possible (not doing so will be a breach of your IVA agreement). Regarding commissions and bonuses, in the case where your IVA was arranged after the 1st of July 2012, it may include a term which states that any bonuses or over-time payment you receive from work only has to be reported to your IP if it is a greater sum than 10% of your pay. If you financial situation has deteriorated since you agreed to the IVA, then you will have the opportunity to decrease your monthly payments. Say for example your benefits have been cut, you have lost a tenant, or you have taken a pay cut at work, then the loss of income you suffer will translate to a decreased monthly payment that is in-line with this loss. If there is no significant change to your financial circumstances, then there will be no changes to your monthly payments. Other instances where you should inform your IP of your change include, changing your job, debts that you have forgotten about, and moving home.

    Remember, failure to keep up with payments could cause your IVA to fail.

    What happens if I am suddenly unable to make any payments to my IVA

    If your financial situation changes suddenly, then you can let your IP know right away, and steps can be taken to reduce your payments, implement a payment break of up to 6 months, without the permission of your creditors, or cancel your IVA completely.

    What does it mean when the IVA fails? And what happens if my IVA fails?

    In cases where you are unable to maintain your monthly payments in-line with the IVA agreement, your IVA may be deemed to have failed. Although your Insolvency Practitioner can take steps to keep the agreement running, by negotiating temporarily or long term reduced payments with your creditors, this can only be done for so long. Eventually your IP will have to draw a line and accept that the IVA has failed. In the event that your IVA fails, your IP will contact your creditors and inform them of this. Once this happens, you will cease to be protected by the terms of the agreement. Your creditors will be able to chase you for further payments. You will have the option at this point to propose another Individual Voluntary Arrangement, declare bankruptcy, or another debt solution, such as a Debt Management Plan.

    What is an Insolvency Practitioner?

    Insolvency Practitioners explained

    An Insolvency Practitioner (IP) is a fully qualified debt professional who is tasked to help organise and plan individual and company’s debt repayment. IPs often have backgrounds as a solicitor or an accountant, and as such are best suited to arrange your Individual Voluntary Arrangement, both making sure that it is legally sound, and financially beneficial for you. Insolvency practitioner

    The expertise of an Insolvency Practitioner is essential to the success of your IVA.

    Do I have to solicit the help of an IP in order to get an IVA?

    Yes, you cannot get an IVA without the advice and help of an Insolvency Practitioner. An IVA is a complex legal agreement; designed to both benefit you and your creditors, and requires expertise and experience in the management and repayment of debt in order to achieve this result.

    What will my Insolvency Practitioner do for me?

    1. Assess whether or not an IVA is the best debt solution for you. An IVA will not always be the best solution for everyone; in some cases bankruptcy or a debt management plan will more ideal. An IP can discuss the advantages and disadvantages of an IVA with you, to make sure that you understand the full extent of the risks involved, allowing you to make an informed decision. By looking at your individual circumstances, an IP can give you their professional opinion on how you credit rating, or your home will be affected by you taking out an IVA. If you feel as though you would like some advice on whether or not an IVA may be the best solution for your individual set of circumstances, call 0800 955 5020 to speak to an expert now.
    2. Help organise lower monthly payments. Your IP will look over your budget, your income, and your expenses, to work out how much you can afford to pay each month after your household and other essentials are taken care of. Your monthly payments need to be set up so that you have enough money left over at the end of each month to live relatively comfortably, while still being mutually beneficial for your creditors; and doing so requires very accurate calculations and thoughtful negotiations on the part of your IP.
    3. Speak with your lenders in order to propose the IVA agreement. Your IP will meet with your lenders and will explain the terms of the agreement to them.
    4. Provide you with support and guidance throughout the course of your IVA. During your IVA your financial situation may go through many changes, and as such, the your payments may have to alter. If your payments need to be temporarily paused for up to 6 months, your IP will handle this for you. If you decide to move home, or you lose your job, you IP will help to maintain your IVA.

    Who does the IP represent, me or my creditors?

    In a sense, the IP represents both you and your creditors. The IP will act as a mediator, making sure that all parties adhere to the terms of the agreement. In this way, your IP will protect you legally, but at the same time guide you to make sure that you do not break the terms of the contract. The IP will make sure that the agreement is fair for you, and also for you creditors.

    Do I need to meet my IP in person?

    It is not essential for you to meet your IP in person. It is possible to make all the necessary arrangements via phone and email, although it is advisable that you attend the meeting of creditors, where the agreement will be proposed and agreed upon.

    What do I need to prepare in order to meet with/ speak to my IP?

    • Evidence of you income, for example payslips, letters relating to your benefits, or you bank statements. These will be used to help your IP determine who much your monthly payments will be.
    • Evidence of any savings you may have, like bank statements.
    • Details of any assets you may possess, like your vehicle and your home.
    • Information on your mortgage, or your rent.
    • What you believe your budget to be, including your total income and expenses. Remember that it is important to be as honest and accurate as possible to make sure that you end up with an agreement that you can stick to.

    Are Insolvency Practitioners regulated?

    All IPs are regulated by either, the Department of Trade and Industry, the Association of Chartered Accountants, or the Insolvency Practitioners Association. The regulating bodies ensure that the IP will act according the law and work to a high professional standard.

    What is the IVA process?

    Step 1: Speak to a debt advisor

    To begin, you will start by speaking to a debt advisor who will confirm whether or not an IVA is the right solutions for your current financial situation. There are many debt solutions available, and it is important to select the one that best fits your individual circumstances. Your debt advisor will help you to figure how much you will likely be able to repay your creditors, and therefore how likely it is that your IVA application will be accepted. In the event that your situation is right for an IVA, the advisor will write up a statement of affairs for you, to be given to your Insolvency Practitioner. If you would like to speak to an advisory now, call 0800 955 5020 to begin the process.

    Step 2: Your Insolvency Practitioner will draft your proposal

    Your IP will assess your financial situation and calculate the optimal amount of money you can afford to pay each month to your creditors. This figure will be formulated with your financial well-being in mind, to try to help you maintain your living essentials from month to month. You will be required to give some evidence of your income and your expenses, so that you IP can make an accurate assessment of your financial situation. The interests of your creditors will also be kept in mind, as it is important for the IVA to be fair and balanced if it is going to be successful. Your IP will outline all other possible solutions to you, like bankruptcy, before their plan is drafted into a proposal to be sent to your creditors for acceptance.

    Step 3: Your creditors will accept, decline, or request amendments to the proposal

    Your creditors will have the opportunity to modify the proposal drawn up by your IP. If there have been modifications, for example, a request for an increase the monthly payments that your IP has calculated, then your IP will give you the details of these and discuss the implications with you.

    Step 4: A creditors meeting will be held

    This meeting is another opportunity for your creditors to discuss the proposal, and make a formal decision on whether or not to accept the proposal. For the proposal to be accepted, the value of the debt owed to the accepting creditors must add up to 75% or more of your total debt. For example, if you owe £100,000 worth of debt, then the debt which is owed to the creditors who have accepted your proposal must add up to £75,000 or more. Once your creditors have accepted the proposal, the IVA agreement becomes legally binding. In the event that your creditors reject the proposal, you will have the opportunity to amend your proposal with your IP and reapply the proposal.

    Step 5: All creditors and the court are informed of the IVA agreement

    All parties involved and the courts, will be formally informed of the IVA agreement. Your IP will be put in charge of mediating between the parties involved, supervising the arrangement, and supervising the distribution of any assets and repayments.

    Step 6: You will begin making payments

    As the agreement is in full effect, you can begin making payments according to the terms of the IVA. This will be for a period of time between 5 and 6 years.

    Step 7: You become free from your debt

    Once you have fulfilled the terms of your agreement and kept up with your payments for the 5 -6 year period, you will be free from your debt, with any outstanding debt being written off on the completion of your IVA.

    How long will it take to set up an IVA?
    This is will depend on your circumstances and how complex your financial situation is. In general, the process will take up to a month, and can be broken down as follows:

    • Speaking to your advisor about your current financial situation and whether an IVA is the right solution for you. Call 0800 955 5020 to speak to an advisor now.
    • You will receive a debt advisory pack, usually within two working days, which will detail how to apply for you IVA.
    • You can then return the pack with details of your debt, payslips, credit card statements etc. This may take 1 to 2 days.
    • Your Insolvency Practitioner will then contact you to create your IVA proposal and this will then be distributed to your creditors for their feedback.
    • After a period of 15 to 28 days, your creditors will convene a meeting to discuss the proposal and will decide whether or not to accept the terms of the agreement.
    What information do I need to give to my Insolvency Practitioner?
    • Details of your creditors, including names of individuals and companies, and the amount owed to them.
    • An accurate account of your monthly income, along with evidence. It is important that the details you provide are honest, as you do not want to sign up for an IVA agreement which you can not commit to and maintain for its duration.
    • Details of your home, its value, its mortgage, and who provides the mortgage. You should also state if you have any debts which are secured to your home.
    • You should also give information on any and all assets of major value which you possess; including your vehicle (if it is worth more than £5000 you will likely be required to trade it in for a cheaper vehicle).
    Can I cancel my IVA after it has been set up, before the 5 year period?
    Cancelling your IVA, either voluntarily, or having your IVA cancelled because you have failed to keep up with your payments, or have breached another aspect of the agreement will likely not have a positive outcome. Once you cancel your IVA, your creditors will expect to hear how you intend on clearing your remaining debt, and you may have to begin considering alternative debt solutions, like bankruptcy. If you financial circumstances change, you IP can negotiate a change in the terms of the agreement regarding your monthly payments, and can even freeze your monthly payments for up to 6 months, however, it is not recommended that you enter into an IVA if you predict that there is a high likelihood that you will need to cancel at some point.
    Can my IVA be settled early, before the end of the 5 year period?
    Your IVA can be settled early before the end of the 5 year period, namely by way of a full and final settlement. You can also fulfil your obligation as agreed within the IVA sooner than the 5 years specified, by paying higher payments, or in cases where you benefit from a windfall of cash (e.g. from an inheritance).
    What is a full and final settlement offer? And when can I make this offer?
    A full and final settlement offer is an opportunity for you pay off your IVA in full, with any remaining balance of debt being written off. A full and final settlement offer can be made within your initial IVA proposal, in the event that you have the necessary funds available at this time. Making this offer through an IVA agreement means that your creditors will be legally bound by the agreement. Ideally your Insolvency Practitioner will negotiate settlement in which you pay as low as 50% of the total outstanding debt. This this is an attractive prospect for your creditors in the majority of cases; your debt being cleared in one lump sum, allows them to save a lot time and effort, and guarantees them a return of funds. The offer can also be made at any point during the course of your IVA, in cases where your circumstances have changed and you now have access to a large sum of money.
    How can I fund a full and final settlement offer?
    • A windfall of cash acquired through inheritance, presents from family or friends, or the sale of assets.
    • You may come of age where you can acquire an equity release from your property, allowing you to free up a large amount of capitol.
    • Keep in mind that you cannot acquire the capital through a conventional unsecured loan, as this would be in breach of your IVA agreement.
    • In the case where you are given the money by friends or family, this must be on the basis that you do not need to repay the funds to them.
    What are the benefits to paying off my IVA early?
    The quicker you complete your IVA the less you will generally end up paying in total. Paying off your IVA in one lump sum will usually allow your IP to negotiate a lower total sum, as your creditors will be attracted by the prospect of having your debt cleared so soon. Once your IVA is completed you begin rebuilding your credit rating and the sooner you are able to repay your creditors. If you are able to show the ability to manage your finances, by paying off your IVA sooner than is expected, this can have a positive effect on your credit rating.
    What will happen at the end of my IVA?
    After the 5 – 6 year period, if you have adhered to the terms of your agreement and kept up with your payments, then the remaining balance of your unsecured debt to all your creditors will be completely cleared. Your creditors will not pursue for these debts ever again.
    Do I need to cancel my direct debits?
    You will need to cancel any of your direct debits set up with your creditors to make sure that you do not pay them twice. You do not need to cancel direct debit payments for your mortgage, or rent.
    Do I need to change banks on an IVA?
    This is a good idea if you owe money to your current bank. In this case you should close your account when you can and open another account with a different bank to pay your income into. This way you income will not be taken instantly by the bank which you are indebted to.

    How do I know if an IVA is the right debt solution for me?

    Are Individual Voluntary Arrangements the right solution for me?Thinking Man

    By acquiring an IVA you will be able to reduce the amount you pay every month to an affordable level, which can help you retake control of your financial situation. You will also be protected from interest and late charges being added to your debt and you will be given years to pay it back, which is great for making your debt manageable again. At the end of the IVA, any outstanding unsecured debt will be written off. However it is the time span of an Individual Voluntary Arrangement that makes it unattractive as a debt solution. Once you have agreed to one, you will be legally bound for at least 5 years and during this time you will have to focus your finances on debt repayment. Bankruptcy can often be finalised in a year, so if you are someone who is struggling financially, but would like a swift resolution to the problem, then an Individual Voluntary Arrangement is not for you. Also if you are someone who is concerned about their credit rating and future ability to acquire credit, then an Individual Voluntary Arrangement is not for you. A record of it will be kept on your file for up to 7 years and this will make it severely difficult to acquire any new credit during this time. You might also have to remortgage your property at the back end of the arrangement which can be inconvenient. However, if you desire to avoid Bankruptcy and have tried other debt solutions to no avail, then an Individual Voluntary Arrangement might be a good way to make your debt manageable. A family man might consider this, as keeping your house is a massive benefit of this course of action. For advice about whether you are suitable for an Individual Voluntary Arrangement, contact our debt helpline today on 0800 955 5020.

    IVA vs Bankruptcy
    Two of the most frequently used debt solutions by individuals across the UK are Bankruptcy and Individual Voluntary Arrangements (IVA’s). Although both are types of insolvency, they are nevertheless widely different in their composition and approach to dealing with debt and as such the superiority of one over the other is dependent on your unique set of circumstances. It is worth stressing that these are both relatively drastic debt solutions and as such are best suited to people with particularly high levels of debt, low income and no foreseeable way of paying back their loans anytime soon. But which one is the most fitting for you? Read on to find all the necessary information to help you determine the answer to your debt problems.

    IVA’s are a longer term debt solution

    IVA’s legally bind you to making reduced monthly contributions towards your debt for a period up to 6 years, during which time you cannot leave the arrangement. You will have to make each of your repayments on time, or else risk the end of your agreement, and must alert your presiding Insolvency Practitioner if there are any upward changes to your salary. As such, entering into an IVA is a long term commitment, and although you stand to have the entirety of your debt cleared at the end of the 6 year period, you nevertheless have to focus your money usage around your debt. Conversely, the Bankruptcy period usually lasts for around 12 months, after which you might be obligated to make small monthly contributions if you have enough disposable income to do so. After the initial 12 month period is over, your debt is written off, meaning that both stand to clear your balance but in far different time frames. Obviously, you stand to lose far more in assets via Bankruptcy and this is a factor that should be considered. But if you are single, have little assets, but a large amount of debt, then Bankruptcy is perhaps better for you because you can clear your debt off and move forward with your life within a year. On the other hand, IVA’s incline you to focus your attention towards debt repayments over 6 years, which makes it harder to move forward financially. But if you are willing to enter into a long term repayment method in order to maintain stability within your home and assets, then it likely a better course of action for your problems than an IVA.

    Bankruptcy poses a greater threat to your employment

    Though IVA’s do run the risk of affecting your ability to retain and attain certain jobs, the chances of any inhibitions manifesting in reality are relatively slim. Accountants and Solicitors stand to be the worst affected by an IVA as it might prevent them from fully practising. However, on the whole most people in employment are left unscathed by the impact on taking out an IVA, though it is worth noting that both Bankruptcy and an IVA necessitate that a record of your usage is placed in the Edinburgh Gazette, which might prevent businesses and directors using your services in the future. Conversely, Bankruptcy poses a far more detrimental to your employment because you will be unable to do any work which requires budgetary management. This rule out civil service jobs, accounting, policing and director roles, meaning that you should probably avoid a Bankruptcy if you work or aspire to enter in these fields. IVA’s have a fixed set of criteria, Bankruptcy can be undertaken by anyone. In order to have an IVA put in place, a meeting of all your creditors must be convened, during which 75% of them must agree to the terms of the arrangement before it can be enacted. You must be able to clearly display that you have over £150 of disposable income a month that you can allocate towards debt repayment and have an Insolvency Practitioner who is willing to act as a Nominee of your behalf with your creditors. As such, if you do not meet these criteria, but still have high levels of debt, then Bankruptcy might be better suited to you. In order to undertake Bankruptcy, you will need £700 to pay to the Insolvency Register as a handling fee and a balance sheet to give financial evidence of your situation. However, once this is paid the process starts immediately and does not need any other external officials or criteria to be met to open proceedings. As such, Bankruptcy is better suited to those with little disposable income each month, whilst IVA’s are superior for those with high levels of debt but a steady income.

    Home and vehicle owners are likely better suited to an IVA

    Bankruptcy can involve the repossession of your most expensive assets, depending on the size of your debt, and as such you could find yourself without a home or car if you follow this course of action. IVA’s allow you to retain ownership over your home, whilst your vehicle is only at risk if it is worth £5,000. It is worth noting that there are shortfalls to your property retention via an IVA because you might be asked to release equity within it during the last year of the arrangement. Because of this, it can be argued that Bankruptcy is better suited to people with few assets but high levels of debt whilst IVA’s are better for people with higher priced assets, high debt but little disposable income. A family might also be better suited to an IVA for larger levels of debt as it allows them to maintain stability within their home, whilst a single person might be more prepared to downsize their living through Bankruptcy whilst they get back on their feet. There are certain cases where this is not the case, such as when your property is in negative equity. When this happens, those using Bankruptcy will not be asked to hand over their property, and as such might influence the decision of a family man who wants a quicker resolution to their problems without having to lose their home.

    IVA vs Debt Management Plans

    They are both ways of managing your outstanding debts

    If you are struggling to keep up with your debt commitments, an IVA or debt management plan (DMP) could be appropriate for you. The two options are both similar as they enable you to consolidate your debt obligations into one monthly, affordable payment. However, there are a number of important differences to consider between the two. Depending on your personal situation, one may be better than the other. Whether you should get an IVA or a DMP will depend on various factors such as the amount you owe, the amount you are able to pay back and your personal financial circumstances.

    Consider how much you owe in total

    The most important factor to consider is the amount you owe. As a rule of thumb, if your debts are less than £12,000, you probably won’t be able to get an IVA. Generally, those with smaller debts are better off with a DMP and those who owe more should get an IVA. Although this is not a concrete rule, you will struggle to get an IVA if your unsecured debts total less than £12,000.

    To get an IVA you need to be insolvent and you may have to remortgage your home

    Another key factor for getting an IVA is that you have to be insolvent. If your debts do not exceed the value of your assets, you will not be able to get an IVA. On the other hand, a DMP does not require you to be insolvent. It also shouldn’t affect your outstanding assets. For example, if you own a home, and are keeping up with your mortgage payments while on a DMP, your home will not be affected. However, if you are a homeowner who gets an IVA, you will probably have to remortgage your house as a condition of the IVA.

    IVAs have a fixed time limit whereas DMPs do not

    IVAs are legally binding agreements between you and your creditors. The main benefit of an IVA is that after 5-6 years of affordable monthly payments, all of your unsecured debts are written off. Also, as it is legally binding, your creditors will not be allowed to contact you or increase your interest payments and other charges. Conversely, DMPs are informal agreements with no set time limit. Unlike IVAs, they require you to pay off all your debts. This could take longer or shorter than an IVA, depending on your circumstance. Therefore, consider how much you owe in relation to what you can afford to pay back. If you feel that you would be able to repay all your debts but simply need a bit more time, then a DMP is a good option. However, if you feel that it would be virtually impossible for you to pay off your unsecured debts, you may have to opt for an IVA.

    The flexibility of DMPs can be both good and bad

    The informality of DMPs are both an advantage and a disadvantage. DMPs are more flexible in the sense that you can renegotiate and alter your payment plan with your creditors if need be. However, unlike IVAs, your creditors can also increase your interest payments and add further charges. Remember, the most important factors to take into account are how much you owe and what you can afford to pay back. If you feel that your current debts would be manageable if you had a bit more time, a DMP could be appropriate. However, if your debts have piled up and have become unmanageable, consider opting for an IVA. In order to qualify for an IVA you need to fulfill certain conditions and 75% of your creditors need to agree to the terms of the IVA. Due to these conditions, you may not actually have a choice. Therefore, find out whether you are eligible for an IVA before beginning to decide between whether to opt for an IVA or a DMP. Although both have an adverse effect on your credit rating, both enable you to manage your unsecured debts with a monthly, consolidated payment, and if successful, both could enable you to write off your debts.

    IVA vs Temporary Repayment Plan
    A Temporary Repayment Plan (TRP) and an Individual Voluntary Arrangement (IVA) are both methods of helping people deal with their unsecured debts. Though both attain this in alternate manners, they are nevertheless highly useful debt solutions for people with large numbers of liabilities. However, determining which is superior is extremely difficult because the reality is that the suitability of one over the other is entirely dependent on an individual’s finances, future prospects and unique set of circumstances. As such, it is necessary to reflect on your own personal debt situation before deciding on one or the other as this will ensure you acquire the debt solution that is most beneficial to your set of problems.

    TMP’s are short term relief, IVA’s are long term debt solutions

    The time frames in which TMP’s and IVA’s work in are completely different and as such the applicability of one over the other is dependent on the size of your debt and your financial prospects in the future. A TMP involves you making an application to your creditor for them to reduce your monthly repayments for a short period of time in order for you to recover financially. As such, they are arguably more relevant to those who are in steady employment but are suffering from temporary financial difficulties. This is because it grants them the necessary time they need to recover whilst also ensuring they have the flexibility to return to normal payments when they are done. Conversely, an IVA commits you to making reduced repayments for between 5 and 6 years, making it a far larger long term commitment than a TMP. People using one will benefit from reduced monthly repayments, just as with a TMP, but will have to do it for a longer period of time. As such, they are arguably better suited to people with larger levels of debt, low income work or those who are unemployed as they will likely be unable to begin making full monthly loan repayments anytime soon.

    IVA’s are better suited for higher levels of debt

    IVA’s last for up to 6 years and as such should only be pursued by those with high levels of debt and low income to repay it. This is because committing your future salary to debt repayments for an extended period is only advisable if you stand to clear levels of debt that you would otherwise be unable to do. Usually, you must have multiple creditor debts totalling over £10,000 in order to qualify for an IVA, so people with debts higher than these are probably better suited to an IVA, unless they have a high salary to address it. Conversely, Temporary Repayment Plans are as they sound and only reduce your monthly repayments for a short period of time. If you have a high salary to address your debt, then a TMP is certainly more advisable than an IVA because it will grant you the time to address your financial difficulties, and will then ensure you can start hastening the repayment process once you are back on track. If you have a low salary and large levels of debt, then the suitability of a TMP over an IVA is dependent on your future employment and financial prospects. If you think you are likely to get a raise or a better job in the future, then a TMP might be better because it doesn’t commit you to a legally binding agreement for 6 years. Similarly, if you stand to gain a large amount of money in the future from something such as a tax rebate, then it still might be worth considering a TMP because you can reduce your payments until you have that money to address full monthly repayments. However, if you are pessimistic about your future employment prospects, or foresee yourself earning a similar income for a long period of time, then an IVA would be more beneficial because you would be able to sustain making monthly contributions towards your debt without stretching your finances so much.

    IVA’s are better for multiple creditor debts

    An IVA requires a convening of all your creditors to decide whether they accept you entering into a reduced repayment arrangement. If 75% of these agree, then all of them are legally bound to the arrangement and will be unable to add interest or pursue legal action against you for the duration of its course. As such, they are better for people with multiple creditor debts as a TRP can only be made to one creditor at a time, and an application to one could impact your success with another. Remember, creditors are not legally obliged to accept your TRP, and as such your chances of getting each one to agree is difficult. Furthermore, the chances are that if you have multiple creditor debts, then you likely have higher levels of liabilities, which means an IVA is better from a financial and convenience perspective. It will ensure you attain legal protection from all your creditors, and have the entirety of your interest and late charges frozen which is something you would have to achieve separately from each creditor if you used a TRP.

    Both leave your property and vehicle unaffected

    In terms of retention of your most prized assets, both a TMP and IVA leave your home and car relatively unscathed, though you might have to sell your vehicle on an IVA if it is worth more than £5000. Furthermore, your insolvency practitioner may request that you release equity in your property to contribute towards debt repayment during the final year of your IVA, meaning that a TMP is better suited if you wish to avoid this.

    TRP’s do less harm to your credit rating

    If your application for a TRP it accepted, a mark of incomplete payment will be placed on your credit file to represent the reduced repayments you make over the course of your arrangement. This subsequently will have an adverse affect on your credit rating and might prevent you from acquiring larger loans in the future. However, a mark from an IVA on your credit file is far more detrimental to your rating and remains present for up to 7 years after you begin one. During this time you will be unable to obtain any new credit though this will probably be beneficial if have particularly high levels of debt.

    IVA vs Debt Consolidation

    Both options simplify your debt obligations into one monthly payment

    IVAs and debt consolidation loans are both viable ways of taking control of your debt. If you are simultaneously balancing a number of debts, and you feel that they are becoming unmanageable, either of these two options may be suitable for you. However, they are both extremely different. Therefore, it is important to understand the differences between the two options and to understand in what circumstances they are appropriate. As with all debt solutions, there is no ‘best’ option, but there are better options for different people in different situations.

    Do you think you are able to pay off all of your debts?

    When choosing between the two, the first factor to consider is the extent to which you are keeping up with your current debt payments. If you are really struggling to pay off your unsecured debts and you feel like doing so is going to be virtually impossible, then an IVA is a good way of resolving this issue. With an IVA, your debts are grouped into a monthly payment which will be affordable enough to leave you with basic living expenses. After 5-6 years of making this payment, your debts are written off. In most cases, you will not pay back the full amount you owed.

    Do you feel like you just need a bit more time to pay off your debts?

    On the other hand, if you are currently able to pay most of your creditors, but you feel like your monthly payments are too much and you need a bit more time, debt consolidation is a better option. If you cannot afford to pay your creditors at all, a debt consolidation loan is unlikely to help, as it is a loan which essentially leaves you with slightly more to pay back overall, despite the fact that your monthly payments will be reduced.

    Both require you to have a stable income

    To opt for an IVA or debt consolidation loan, you need to have a stable income, as they both involve monthly payments. The main benefit of both options is that your debts are simplified into one, manageable monthly payment. However, there is no fixed time limit for a debt consolidation loan; you simply keep paying it back until you pay it off. Conversely, IVAs enable you to write your debts off after 5-6 years of payments.

    There are important implications for homeowners

    If you are a homeowner, there are further implications to bear in mind. If you choose to get an IVA, it is highly likely that your creditors will expect you to release equity (remortgage) in your home towards the end of your IVA, but you will definitely be able to keep your home. Although debt consolidation loans do not require you to remortgage, it is arguable that it might put you in more risk. Unlike IVAs, debt consolidation loans do not take into account living expenses such as your mortgage. Therefore, if you struggle to pay off your monthly debt consolidation payment and your mortgage at the same time, your home could be repossessed. Nonetheless, being a homeowner could work in your favour, as if you take out a secured debt consolidation loan, your rate of interest may be better.

    Debt consolidation loans are further credit; this can be both good and bad

    When thinking about debt consolidation, always remember that it is another loan. Although your monthly payments can be reduced and simplified into one payment, you will probably pay back more overall, due to the higher rate of interest. However, as it is a loan, paying it off successfully may help to improve your credit rating. The same cannot be said about IVAs. Although IVAs are an appealing way of writing off your debts with an affordable monthly payment, bear in mind that, as they are a form of insolvency, they are extremely damaging to your credit rating. Lastly, you can only get an IVA if you are insolvent (i.e. your debts exceed the value of your assets) and if 75% of your creditors agree to it.

    IVA vs Debt Relief Order
    IVAs and debt relief orders (DROs) can both be helpful ways of managing and writing off your unsecured debts. However, although they both have a similar purpose, they are both extremely different. When considering which route to go down, there are numerous factors to consider, due to the fact that qualifying for an IVA or a DRO requires the fulfillment of specific conditions. In short, whether you go for an IVA or a DRO will depend on your personal situation and the total amount of your unsecured debts. If your unsecured debts amount to more than £15,000, you will not be able to get a DRO to cover these debts. Also, although this is only a rule of thumb, it is unlikely that you will be approved for an IVA if your unsecured debts amount to less than £12,000. Therefore, when considering the two options, think first about how much you owe and thus which option is appropriate for you. The conditions for obtaining a DRO are fairly stringent. A DRO enables you to write off your unsecured debts in 12 months, without having to make any payments. Therefore, it is only available to people with low incomes and not much in the way of assets. If you can prove that you have £50 or less per month to live on after basic expenses, then you will be able to qualify for a DRO. Also, if your assets total less than £300 (£1,000 if it’s a motor vehicle), you also qualify for a DRO. Without meeting these two conditions, you will not be able to get a DRO. On the other hand, an IVA requires you to be in stable employment, as it is essentially a 5-6 year repayment plan. Each month, you will need to make a monthly repayment towards your IVA. If you are a homeowner, it is likely that you will have to release some equity from your property towards the end of your IVA. Due to the fact that you need assets of under £300 to qualify for a DRO, homeowners cannot get DROs. In short, if you have a stable income which enables you to make affordable monthly payments, you will not be able to get a DRO and should look into getting an IVA. The main advantage of a DRO over an IVA is that you don’t actually need to repay your debts and they are written off after 12 months rather than 5-6 years. Also, it is up to the official receiver, not your credits, whether you qualify or not. Although a DRO only lasts for one year, it remains on your credit record for 6 years, which is the same amount of time an IVA does. Both will damage your ability to obtain credit in the future. As the conditions for getting a DRO are so stringent and are designed for people who have very low incomes, it is highly unlikely that you will be in a position to choose between getting an IVA or a DRO. Consider the information above to work out which one is appropriate for you.