Applying for an Individual Voluntary Arrangement (IVA): A Comprehensive Guide

An IVA sets up a clear path for you to overcome financial hardships and get your money matters back under your management. You can find all essential information about an IVA application in this guide which covers the application process, essential factors, advantages, and possible challenges.

What is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) lets you combine your debts into one payment plan that you must follow for five or six years. An IVA helps people in debt manage their payments to avoid bankruptcy. During an IVA you make regular payments that match your current financial situation and your creditors typically drop the rest of your debt once you complete your payments.

Who Can Apply for an Individual Voluntary Arrangement?

An IVA is suitable for individuals who:

• Have unsecured debts such as credit cards, personal loans, or overdrafts amounting to £10,000 or more.
• Are unable to repay their debts in full but can make regular payments.
• Have a stable source of income or assets that can contribute to the arrangement.

It is essential to consult a licensed insolvency practitioner (IP). As they will assess your financial situation and determine if an IVA is the right option for you.

Steps to Apply for an IVA

1. Assess Your Financial Situation Before applying for an IVA, gather all relevant information about your income, expenses, and debts. This will help you and your insolvency practitioner evaluate your eligibility.
2. Consult an Insolvency Practitioner (IP) An IP plays a crucial role in the IVA process. They will:
   • Review your financial circumstances.
   • Prepare a repayment proposal for your creditors.
   • Negotiate with creditors on your behalf.
3. Drafting the IVA Proposal The IP will draft a detailed proposal outlining. How much you can afford to pay each month, the duration of the arrangement, and the total amount creditors can expect to receive. This proposal must be realistic and fair to both you and your creditors.
4. Submit the Proposal to Creditors Once the proposal is finalized, it will be presented to your creditors for approval. A meeting is usually arranged where creditors vote on whether to accept the proposal.
5. Approval Process For an IVA to be approved, at least 75% (by value) of the voting creditors must agree to the terms. If approved, the IVA becomes legally binding on all creditors.
6. Make Regular Payments After approval, you will begin making regular payments as per the agreement. Your IP will distribute these payments among your creditors.

Benefits of an Individual Voluntary Arrangement

1. Debt Consolidation An IVA combines all your unsecured debts into one manageable monthly payment, simplifying the repayment process.
2. Debt Write-Off At the end of the IVA term, any remaining unsecured debts are written off, providing you with a fresh financial start.
3. Protection from Creditors Once the IVA is approved, creditors cannot take legal action against you, such as sending bailiffs or issuing court orders.
4. Avoid Bankruptcy An IVA is an alternative to bankruptcy, allowing you to retain control of your assets, such as your home.
5. Fixed Repayment Period An IVA typically lasts five or six years, giving you a clear timeline for becoming debt-free.

Potential Drawbacks of an IVA

1. Impact on Credit Score An IVA will be recorded on your credit file for six years, which can affect your ability to obtain credit in the future.
2. Strict Budgeting You must adhere to a strict budget throughout the duration of the IVA, which may require lifestyle adjustments.
3. Home Equity If you own a home, you may be required to release equity to contribute towards your debts, which could mean remortgaging your property.
4. Non-Inclusion of Certain Debts Some debts, such as student loans, court fines, and secured debts, cannot be included in an IVA.
5. Risk of Failure If you fail to meet the terms of the IVA, it may be terminated, and creditors could resume enforcement actions.

Tips for a Successful IVA Application

• Be Transparent: Provide accurate and complete information about your financial situation to your IP.
• Stick to the Agreement: Ensure you make all payments on time to avoid breaching the terms of the IVA.
• Seek Advice: Work closely with your IP for guidance and support throughout the process.
• Review Your Budget: Regularly review your budget to ensure you can manage your monthly payments.

Is an IVA Right for You?

An IVA is a significant financial commitment and may not be suitable for everyone. It is crucial to weigh the pros and cons and seek professional advice before proceeding. Alternatives such as debt management plans, debt consolidation loans, or bankruptcy may also be worth considering, depending on your circumstances.

Conclusion

IVA helps people who cannot handle debt problems find financial relief. With an IVA you get both a debt repayment program and protections from creditors on your way to being debt-free. To effectively handle an IVA you must stay devoted to the process through disciplined behavior plus thorough planning. Getting expert advice from a licensed insolvency practitioner about IVA benefits and requirements will let you make the best possible financial choice.