Individual Voluntary Arrangements (IVA)
An IVA is an alternative to bankruptcy that was set up by the Government to help people in financial difficulty. It is a legally binding contract between you and your creditors. This means that once it is accepted you should not be contacted by them regarding payment of the debt as long as you keep up with the agreed payments.
Advantages
- A single affordable monthly payment over a fixed repayment period (usually no more than 60 months).
- An agreement that your creditors will freeze the interest and stop any charges so your debt balance does not increase.
- Protection from further action by your creditors.
- On completion your creditors legally write off any debt outstanding. (subject to conditions)
Disadvantages
- Should the IVA fail, the debtor can still be made bankrupt.
- You may be required to introduce a proportion of your properties equity into the IVA, usually towards the end of the IVA. If this is unavailable then the IVA maybe extended for a further 12 months.
- 75% of the creditors based on the value of debt have to agree to the IVA by voting at the creditor meeting.
- There are restrictions to certain types of expenditure allowed.
- The Supervisor must be advised of any changes in your circumstances that arise during the IVA.
- Depending on the level of additional income an individual receives, they could be expected to contribute a percentage of this towards the IVA.
IVA Fee Example
This is a breakdown of payments and fees on a typical IVA
| Nominee's fee | £1,000 |
| Supervisor's fee | £1,938 |
| Supervisor's costs | £236 |
| Typical monthly repayments (x 60 months) | £200 |
| Total paid by borrower (inc above fees) | £12,000 |
| Total unsecured debt written off on completion | £13,000 (52%) |
| |
This example is based on a consumer with approximately £25,000 of unsecured debts who completes an IVA lasting 5 years with no equity in a property.
Nominee's fee
This will include:
- Drawing up your proposal (what you will pay, what creditor's will receive etc).
- Liaising with your creditors.
- Dealing with any issues that arise on a daily basis.
- Holding your creditor meeting.
Depending on the terms of your IVA, your first few monthly payments will go towards paying the nominee's fee. The nominee fee will be paid before your creditors receive any of the money paid into your IVA. This means your accounts could go into arrears, or further into arrears at the start of your IVA.
Supervisor's fees
These will take up a percentage of your monthly contribution and will not be deducted until your nominee's fee has been paid. The amount of fees paid will be according to the terms of your IVA proposal.
The supervisor's work includes:
- Reporting the results of the creditor meeting to you and your creditors.
- Maintain your IVA and deal with any issues which may arise.
- Carry out regular reviews of your IVA.
- Prepare and issue annual reports to creditors.
- Arrange IVA variation meeting should there be a change in your circumstances.
- Provide you with ongoing support and advice where necessary.
You must keep up your monthly contributions in your IVA. If you fail to maintain payments to your creditors then your IVA will be in breach and possibly fail. This could leave you worse off and you will be liable for all outstanding balances and any costs incurred. If you are a homeowner, your property may also be at risk.
Terms & Conditions apply. Third party specialists will be used.