What is an IVA?
If you have more than £9,000 of debt an IVA, or Individual Voluntary Arrangement, may be the right option for you. It’s an alternative to bankruptcy that could write off up to 65% of your debts.
How long does an IVA last?
An IVA typically lasts for five years, but it could be up to six years depending on whether you can release equity in your home.
How much does an IVA cost?
An IVA comes at a standard cost, you’ll simply make one monthly payment, which includes fees, set at 17% of your debt.
Want to know how much an IVA can help you
An IVA can help you to resolve your unsecured debt without having to declare bankruptcy.
The typical duration of an IVA is five years. In this time, you can start to make ends meet again and manage your money, knowing you are making a single affordable payment.
Perhaps most importantly, you won’t be required to sell your home against your wishes. You will need to undergo an assessment for a re-mortgage but you won’t be pressured into a sale if you don’t want to, although other assets which are not deemed as essential may be used towards payments. This might include things like savings and ISAs.
Additional benefits of an IVA
As well as the main benefits of taking out an IVA, other advantages involved in an IVA include:
- An agreement that means once your creditors agree to it they can’t change their minds so long as you stick to the terms.
- You can still open a bank account but you won’t be allowed an overdraft.
- You won’t have to sell your property if you don’t want to.
- Flexibility to ensure that you can keep up with your payments. Your creditors may also need to agree to this.
Important things to remember
- You might be required to re-mortgage your home towards the end of your plan if you have equity in your property.
- It will stay on your credit history even once the IVA is closed.
- Whilst five years is the typical duration of an IVA, it could extend to six years, depending on circumstances.
- You are not allowed to borrow during your IVA.
- Your credit rating will be impacted.
- If the IVA fails we can no longer protect you from creditor action, nor can we keep the debt frozen; it will start to grow again. Secondly, there will be no refunds on fees.
- Details of your IVA are listed on the Insolvency Service website, which is available to the general public.
Is an IVA appropriate for me?
It is an important question to consider and we would always advise you to take the time to look at all other possibilities. There are also a number of criteria you must meet before you take out an IVA.
Do I meet the Criteria?
In order to set up an IVA you must:
- Typically have at least £10,000 of unsecured debt. For example from loans, credit cards, store cards, catalogues and/or overdrafts.
- Be in a situation where you’re struggling to meet your monthly repayments.
- Live in England, Wales or Northern Ireland.
- Have a licensed Insolvency Practitioner prepare your proposal and present to your creditors.
Key benefits of an IVA
- An IVA reduces your debts. The amount you repay depends on personal circumstances and the monthly payments you can afford.
- All interest is frozen and you’re protected from creditor action.
- It prevents bankruptcy, so for people in professions or in offices where going bankrupt will lose you your job an IVA is a great alternative.
- Unlike in bankruptcy, you can protect your assets such as your home and your car.
- It is an agreement that runs for a fixed period (usually for five years).
- You can still open a bank account with an IVA, however, you won’t be allowed an overdraft facility.
- Failing to stick to your agreed terms will result in creditors resuming collection actions.
- You will need to have a re-mortgaging assessment. If this isn’t achievable then you may be asked to extend the arrangement by 12 months.
- If you have assets which are not essential to you then you may be asked to make these available to your IVA (e.g. savings plans and ISAs).
- Your credit rating will be affected.
- You are not allowed to borrow or obtain credit during your IVA.
- Fees will be paid from the money you pay in when your IVA begins. However, if your IVA fails we can no longer protect you from creditor action and your debt won’t remain frozen. Plus, there is no refund on fees.
What are the IVA fees?
As everyone’s circumstances are different, IVA fees will vary depending on the amount you can reasonably afford to pay and are agreed with your creditors. We’ll never charge you anything upfront and our fees will be included in your monthly contributions.
What do IVA fees cover?
IVA fees cover:
- Agreeing a personal monthly budget with you.
- Drafting and preparing your agreement.
- Holding a creditors meeting and presenting your case.
- Dedicated customer care team on hand to help with any queries/issues you may have at any time throughout your IVA.
- Conducting annual reviews with you to ensure your agreement is running as planned.
- Distributing your payments to your creditors.
- Making any changes to your IVA should your circumstances change.
- Working with your creditors on an annual basis to ensure that your IVA runs smoothly.
It is also worth noting that at Debt Free Direct:
- Our fees are all covered by the contributions you make to your IVA (monthly payments, surplus assets).
- The nominee’s fee for setting up and agreeing the IVA with you and your creditors is normally a fixed fee. This will be taken before any payment is made to creditors. It is different for supervisor’s fees. These are normally on a percentage basis and spread over the duration of your IVA.
- You will never be faced with any unexpected fees as we will always tell you what fees are involved and how they are calculated.
- Creditor Voting Agencies apply the same fee basis for all IVA providers (inc. Charities)
How do I apply for an Individual Voluntary Arrangement?
Get more information about an Individual Voluntary Arrangement and other debt solutions by contacting the Money Advice Service.