An Individual Voluntary Arrangement (IVA) is a formal, legally-binding debt solution plan. It is available as an alternative to bankruptcy for individuals in England & Wales who are struggling to repay their debts but want to keep control of their assets.
What is an IVA?
An IVA is an arrangement made between you & your creditors which allows you to pay one affordable monthly sum directly to us, which will then be distributed to your unsecured creditors, i.e store cards or self-employed business debts, on a pro-rata basis (in proportion to what each is owed). What you pay is calculated based on your income & expenditure, allowing you to live your life reasonably and without worry, as an IVA prevents creditor threats & bailiff action. An IVA is particularly useful for sole traders who are looking to avoid bankruptcy but can’t secure the finance needed to pay off liabilities.
At Wilson Field we will help you to calculate one monthly, affordable sum, from which we deduct our fees before making a distribution to your creditors.
Our fees for preparing the IVA proposal come from the first few monthly instalments; from then on we take a small portion of the monthly payments to pay administration costs. Creditors often agree to the arrangements because it represents a better return than if you go bankrupt.
It is a common misconception that an IVA will cost extra on top of already unaffordable outgoings. This is incorrect. Creditors will currently be taking (or demanding) repayments from your account irrespective of whether you can afford it.
When is an IVA appropriate?
To be considered for an IVA, there are criteria which your situation must meet.
- Having a certain amount of unsecured debt which you are struggling to pay. IVAs are often most effective for debts exceeding £10,000. Other solutions, such as bankruptcy a debt management plan, or a Debt Relief Order may be more appropriate for smaller amounts of debt. Each situation varies, so contact us for expert advice swiftly to take back control of your financial situation.
- Having an income which can support monthly repayment contributions after your necessary outgoings, such as rent/mortgage repayments, bills, food & petrol deductions etc.
If you’re unsure of whether you meet these criteria, no need to worry – get in touch with one of our experienced advisors for free guidance.
Benefits of entering into an IVA
- An IVA halts all unsecured creditor action (including the use of bailiffs) and takes the pressure off. Once agreed all parties are committed to the terms.
- IVA proposals are created based upon what is affordable to the debtor, allowing him/her to live their life having been alleviated of multiple, unaffordable creditor repayments.
- You can often retain your home through an IVA. Mortgage repayments are also factored into a person’s outgoings when determining the affordability of IVA repayments. Our experienced advisors can help with any questions you may have regarding your home.
- Any remaining debt is legally written off after your last IVA payment.
Things to consider before entering into an IVA
When considering an IVA, there are some drawbacks which need to be weighed-up before you commit, as once accepted by your creditors, an IVA proposal becomes a binding contract.
- It will have a negative impact on your credit rating, although if you already have been struggling with your finances, your credit rating may already be damaged
- If you are a house-owner, you may have to try to re-mortgage to contribute towards your debts when nearing the end of your arrangement. The technicalities of this can be explained in more detail by one of our advisors.
- Secured debts, child maintenance, student loans and fines are not eligible for inclusion in an IVA. They will, however, be taken into account when establishing affordability.
- There is no guarantee that your IVA proposal will be accepted by creditors. However, as experienced insolvency practitioners, we believe that our years in the field stand you in good stead to diminish the risk of a rejection. We can also advise you on other personal debt management routes if necessary.
The IVA process
- Speak with us
- A face-to-face meeting is not usually necessary. The sooner you reach out to our advisors, the quicker your debt can be managed & put to bed. Stop the snowballing & take the step.
- Assess your eligibility with our experts
- Together, we can explore other options if an IVA is not appropriate to your situation. Our advisors can assess your situation over the phone and guide you on the best route out of debt based on your circumstances.
- Preparation of your IVA proposal
- If an IVA is indeed the best way forward for you, your IVA nominee will need to collate various documents in order to create a proposal for your creditors to review. These include:
- Contact details of creditors, as well as details of debts owed.
- Proof of monthly income & expenditure.
- Additional details regarding your financial situation, such as assets like your home, car etc.
- IVA presentation & creditor vote
- Copies of the IVA proposal are sent to your creditors. 75% of your creditors need to agree to the IVA for it to be accepted and binding. Voting is generally completed by post or fax, but if requested a virtual meeting may be held.
- Contractual repayments begin
- If accepted, the proposal becomes a legally binding contract & your monthly repayments begin. Your financial situation will be reviewed annually. If your circumstances change whilst you’re in the process of an IVA, variations can be presented to creditors by your qualified Wilson Field supervisor for their review.
- Situation assessed
- Situation assessed after 4 years – potential release of equity in home (Internal link to separate content). If you are a home-owner part of the initial proposal will include a review of the equity in
your house after 4 years. If this has grown you may have to refinance to make an additional contribution to the IVA.
This depends on individual circumstances. If you want further information please contact us to discuss in more detail.
- Writing-off of remaining debt
- At the end of your five-year repayment plan, any debt leftover is legally written off. This debt is classed as unaffordable to you, as set out in your initial IVA proposal which your Wilson Field nominee calculated from your income and outgoings.
Life after an IVA
At the end of an IVA, any remaining debt will be written-off. With a fresh start and the familiarity of the routine of meeting your commitments, it is an opportunity to get back to normality. An IVA will stay on your credit history for 6 years after the start of the arrangement, so you may need to rebuild your credit rating.
To begin to recover your credit score, apply for a credit card with a low limit & use it to set up regular, small payments such as your mobile phone contract or petrol top-ups. To make sure you never miss or are late with payments, we recommend setting up a direct debit for the minimum monthly payment; you can pay additional amounts if you wish. Frequent, low-risk steps such as these will build your reliability as a trusted, credit-borrower
Use some of your extra money to put into savings: You may find yourself in the position where you have surplus income after your IVA contributions have finished. Just as you have maintained IVA contributions, regular saving is very much related to habit. So this could be an opportunity to build up savings to build up a “rainy day” fund. This could take you on holiday or prevent you from falling into debt again if you’re hit with unforeseen bills in the future.
Celebrate! Coming out of an IVA is a huge achievement, so don’t forget to allow for celebrating when planning for your exciting, debt-free future.