Individual Voluntary Arrangement
Explainer
Think of an Individual Voluntary Arrangement as consolidating your debts and paying instalments for a fixed period in full and final settlement of them.
Risk Management
An IVA demonstrates an individual is taking steps to try and pay back creditors as much money as possible. ​
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If the IVA is approved, creditors bound by it cannot take any action against the individual as long as they comply with the IVA obligations.
An Individual Voluntary Arrangement or IVA is a legal process which enables an individual facing financial difficulties to avoid going bankrupt by making a formal, legally binding deal with their creditors. Creditors have to agree to the process but generally, it allows the debts of the individual to be put to one side and paid or part paid over a period up to 5 years.
How does an Individual Voluntary Arrangement work?
It is a contract between an individual and their creditors. The individual proposes a plan to their creditors being the people or organisations they owe money to. This plan could include repaying a reduced amount or giving the individual more time to pay.
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For the plan to go through, 75% (by the value of debt) of the creditors who vote must agree to it. If they do, the IVA becomes legally binding for all creditors involved.
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During the IVA, the individual can maintain control of their financial affairs, subject to adhering to the terms of the IVA, generate income, and ideally get back on track financially. The IVA typically runs for a fixed period (e.g., 3 to 5 years).
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A licensed insolvency practitioner is appointed to oversee the IVA. They make sure the individual sticks to the agreed repayment plan and reports to creditors on progress.
How does it help?
An IVA enables an individual to keep control of their own financial affairs, and try to resolve their financial difficulties in a way which avoids the stigma and financial intrusion of bankruptcy.
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It is an organised, legal process to pay back creditors giving peace of mind to the individual.
How long does it take for the individual to be in an IVA
Typically, from the point you contact us, you could be in an IVA within 4-6 weeks. It depends on how quickly financial information can be provided and how much creditor pressure there is. ​
What are the potential outcomes of an Individual Voluntary Arrangement?
If it is rejected:
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Nothing happens except the individual will need to take alternative steps to resolve their financial situation.
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If it is accepted:
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Resolution - the individual completes the IVA process and is deemed to have paid those IVA debts in full (even if creditors were only part paid their debt under the arrangement).
Failure - if the individual fails to meet the IVA obligations, or encounters new financial difficulty with creditors arising after the IVA was approved, they will be forced to consider Bankruptcy.