IVAs

An IVA is an Individual Voluntary Arrangement that is often used as an alternative to bankruptcy. This is a legal measure that is ratified by a County Court and that has the aim of helping you to repay money that you owe without having to declare yourself bankrupt.

This kind of measure won’t suit every person who has debt problems - to make the most of an IVA you do need to have enough disposable income to make significant payments every month and/or specific assets that you can use to help pay off what you owe. But, this solution can be particularly useful to you if you are a homeowner and don’t want to declare yourself bankrupt on the basis that you might lose your home in the process.

An IVA will usually be set up to last for a period of between three-five years. Any debts that are left once the IVA has finished are then written off. You can arrange IVAs that pay a monthly payment to your creditors, ones that pay off single larger sums or some can combine the two methods.

If you wish to set up an IVA then you will need the help of an Insolvency Practitioner (IP) who has relevant IVA qualifications. Your Insolvency Practitioner will ask the court to set up an interim order at the beginning of the process which prevents creditors from making moves to declare you bankrupt. Your Insolvency Practitioner then send a proposal to the people to whom you owe money outlining what you can repay and how and calls a meeting of your creditors. They do not have to attend this meeting but they do need to know that it exists otherwise they have no legal requirement to agree to your IVA.

At this meeting you need a percentage (75%) of your creditors to agree to the IVA proposal. This percentage isn’t based on the number of creditors but on 75% of the money that you owe. Creditors also have the right to ask for the terms of the IVA to be changed. Many creditors will accept an IVA on the basis that they will get more money back than if you were declared bankrupt but they are under no obligation to do so.

If your creditors agree to your IVA then your Insolvency Practitioner will take over collecting and distributing the money to your creditors as agreed until the IVA is done.