IVA Frequently Asked Questions (FAQ)

IVA Questions Answered

What is an IVA ?

You may have heard of an IVA through the internet, from a friend or colleague or even on the TV. But more often than not, many people call us at IVA.net asking "What is an IVA?". An IVA, also known as Individual Voluntary Arrangement, is a legal and government approved method of resolving debt problems. It can sometimes be considered as an alternative for those of you who struggle with debt, but do not want to go bankrupt.

If you are struggling to make your current debt repayments you could be eligible for this scheme.

By showing that your monthly living costs and debt repayments are more than your monthly income we will show that you cannot afford to pay your debts. This is where an IVA can help as you will repay only what you can afford without using money you need for essentials, like your mortgage/rent payments, food and utility bills and other monthly costs.

How long does an IVA usually last ?

An IVA usually lasts for five years but it is also possible to complete it in a shorter period, especially if you can produce a partial lump sum.

Who can an IVA help ?

Anyone in England, Wales, and Northern Ireland with a total debt of over £15,000 and a stable income can be helped by an IVA. For residents of Scotland we can recommend a practitioner who can set up a Standard Trust Deed, which is the Scottish equivalent.

How much does an IVA cost ?

When you propose an IVA to your creditors, you will offer to re-pay a percentage of the debt via monthly installments. The sum suggested is based on what you can afford to pay. The Insolvency Practitioner (IP) will help you figure out this number.

This means that monthly re-payments vary on case-by-case basis and depend on what assets you have and much money you have available after living expenses have been deducted from your monthly income.

There does tend to be a minimum amount that creditors will accept as part of the IVA proposal. Creditors will most likely reject any proposal that pays them less than 20-25% of what they were originally owed.

Will my creditors agree to an IVA ?

In order to be accepted for an IVA, 75% of your creditors have to vote in favour of it.

If I set up an IVA can anyone interfere with the running of my business ?

If you stick to the terms of your IVA, you can carry on running your business under your sole control with no outside interference.

How much does an IVA effect my credit rating ?

During the term of the IVA you are not allowed to take out any further unsecured credit such as credit cards, store cards, personal loans, etc. This is a standard stipulation of an IVA and a note will be put on your credit file alerting lenders to this fact. This note will generally remain on your credit file until one year after the duration of the IVA. While this record is on your credit file many lenders will choose either to lend at a high interest rate or not at all.

What happens when the IVA is completed ?

At the end of an IVA process you will receive a Statement of Completion from the supervisor. Normally this will happen within three months of the final payment. A copy of this will also be sent to the Insolvency Service for their records.

What if I default on my payments ?

If you fail to meet the terms of your IVA by defaulting on payments then the supervisor of the IVA can begin bankruptcy proceedings against you.

Can I set up an IVA if a Bankruptcy Order has been made against me ?

If the Bankruptcy hearing has yet to take place than is it possible to set up an IVA. The IP may need to issue an Interim Order to halt the proceedings while an IVA proposal is put together. The process is made more difficult it's harder to reach an attractive proposal with the with the creditors as bankruptcy costs must be taken into account on top of the costs of setting up an IVA.

Will I have to sell my house if I set up an IVA ?

Unlike with bankruptcy, an IVA will not force you to your home. You may be asked to release some of the equity in your property to pay your creditors though.

What about any other assets of value ?

If you have other valuable assets, these will be assessed on a case-by-case basis. It is usually possible to exclude a car of a certain value on the basis that you require it travel to work. There are different requirements if your car is financed on a Hire Purchase agreement.

What if I get a financial windfall during the term of the IVA ?

It is normal for IVA agreements to contain a windfall clause, meaning that assets such as lottery winnings, bonus payments, inheritance, and gifts must be declared to the IP and paid in the IVA for the benefit of the creditors.

Would I have to change my lifestyle if I entered into an IVA ?

An IVA is a very serious proposition for people that really want to get out of debt but providing your lifestyle is no excessive, you will not have to change it just because you entered an IVA. There are specific guidelines to ensure that you have a reasonable standard of living.

However, there are not allowances for such things as social life, sky subscription, lottery, and smoking etc. Creditors do not see these things as essential living expenditures. You will be expected to live within a budget, which is why it is very important that you consider all of the normal household living expenses and include them in your financial statement.

Can I complete my IVA earlier than the agreed time ?

It is possible to complete an IVA early if you get a windfall of money, which provides enough funds to pay off the amount left on your IVA.

It will then be necessary for you IP to arrange another Creditors Meeting to seek approval of your offer of a lump sum early settlement, which will lead to an early completion of the IVA arrangement. Most creditors will agree to this because it means they will be getting paid much sooner than the original terms.

I am on Income Support. Do I qualify for an IVA ?

No. You should probably consider either bankruptcy or an informal repayment plan.

I am a professional. If I enter an IVA what will happen with my accreditation ?

It is best to check with the professional organisation of which you are a member to see if undertaking an IVA will impact your accreditation. In certain professions, undertaking an IVA can be contrary to the conditions and terms in your employment contract so you should insure that this is not the case.

How do Insolvency Practitioners make their money?

Insolvency practitioners take their commission fee from your creditor’s payments. This means that you are not directly paying for the service, your creditors are. The amount the trustees get varies between practitioners and the size of your IVA.

We deal with one of the United Kingdom’s largest debt management companies who will advise you more on whether an IVA is the best solution for you.

Why would I Fail An IVA?

You will fail an IVA by not keeping up the monthly repayments that are agreed at the start of your process. This is why it is particularly important to be realistic at the start of your IVA and make sure you list every possible expense you have.

Losing your job or income can result in failing an IVA. When your financial situation changes you are obliged to contact and discuss it with your practitioner who will take a look at the options available and make suggestions accordingly.

Are you eligible for an IVA ?

Try our simple debt solution calculator to find out.

To get the best information for your circumstances it is always recommended to speak with a qualified adviser. We could be helping you in a few short minutes in a friendly, no-obligation chat : Request a call back or call us on 0800 043 3329

Alternatively if you would prefer to receive information by e-mail, please feel free to contact us via this simple form.