What is an IVA?

An Individual Voluntary arrangement is a form of insolvency that allows you to write off up to 80% of your debt* as an alternative to bankruptcy.

Once entered, creditors can no longer contact you directly as all contact goes through your debt management company or Insolvency Practitioner (IP).

After making repayments for a set period of time, usually 5 or 6 years, any remaining debt is officially written off.

Is an IVA right for me?

If you have debts exceeding £6000 and a stable monthly income, but you‘re struggling to make your monthly repayments, then an IVA could allow you to manage your debts with a more affordable, set monthly amount.

When should I consider an IVA?

An IVA could be right for you if you are:

• Worrying about money
• Struggling to pay your household bills
• Concerned about creditor contact
• Relying on your overdraft or credit card
• Missing repayments or getting into arrears

What debts does an IVA cover?

An IVA covers most unsecured debts, which means debts that are not tied to assets (usually your home). These can include:

• Household bills
• Council tax
• Credit cards
• Personal loans
• Overdrafts
• Payday loans
• Buy now, pay later debts

Apply for an IVA

Are you eligible for an IVA?

Our expert debt advisors will be able to tell you everything you need to know about debt solutions and eligibility criteria. For an IVA, you’re usually:

• Insolvent, meaning you are currently unable to pay back the money you owe
• With at least £80 in spare income each month that can be paid towards your debts
• Have a minimum total debt of £6000
• Owing money to at least two separate creditors
• A resident of England, Wales, or N. Ireland

What debts can’t be included in an IVA?

An IVA typically includes most unsecured debts. Any debts that are tied to assets, like your house, will not be covered in an IVA.

What can’t be included:

• Mortgages
• Debts incurred through fines
• Student loans
• Court fines
• Social fund fines
• Hire purchase agreements
• Child support arrears

The day-to-day with an IVA:

As an IVA is often a long-standing agreement, over multiple years, it’s important to understand how living with an IVA will affect you.

How an IVA affects your finances

In an IVA, your monthly debt repayments will be vastly reduced. This will, hopefully, free up more of your monthly income and allow you some financial respite from your current debts.

How an IVA affects your job

In most instances, having an IVA won’t affect your current employment.  Though it’s always good to read over your contract before going forward.

How an IVA affects your home

Your home will be considered when applying for your IVA.  Under the arrangement, it’s unlikely you will be made to sell your home. However, the IP will review any equity in your home, and you’ll probably be required to remortgage and release any available equity.

How an IVA affects mortgages & renting

Mortgage

Being in an IVA will make it difficult to get a mortgage. In most instances, it’s often better to wait until the IVA is no longer recorded on your credit file before applying. Though there are specialist lenders who will be more likely to consider your offer, you probably won’t get access to the best rates as a result of your credit score.

Renting

In most instances, being in an IVA shouldn’t affect your current renting contract, though we always advise checking contracts for any relevant clauses. As your credit rating will be affected by an IVA, this may become a concern for future landlords when running a credit check. These concerns can be offset if you are either renting with another person or can find someone to become your guarantor during the application process. In these situations, we always encourage honesty with your prospective landlord, as they may be more understanding if given the full context.

Will an IVA stop bailiffs?

If you have any outstanding court actions including the use of a bailiff, they will be stopped once an IVA has been put in place. This means that bailiffs will no longer be able to attempt collections to repay any debts included in an IVA.

Do creditors have to accept Individual Voluntary Arrangements?

Once an IVA proposal has been drawn up, your insolvency practitioner will contact all of your creditors. Creditors don’t have to accept the proposal but an IVA will go ahead providing 75% of the creditors who responded are happy with the proposal.

What’s the difference between an Individual Voluntary Arrangement and Bankruptcy?

Both solutions are forms of insolvency and you’ll need to pay a fee to enter into either of them. Your name will be recorded on the public insolvency register and a record will stay on your credit file for a minimum of 6 years.

The main differences are that an IVA can offer more protection if you are a homeowner or have other assets you would like to keep safe. An IVA usually involves making reduced monthly payments for a 5 or 6 year period, whereas Bankruptcy usually completes in 12 months, but rarely protects any assets.

With an IVA, you’d need to have a surplus income of around £100+ a month, whereas bankruptcy only requires you to cover the bankruptcy fee itself, plus any court fees.

Can you pay off an Individual Voluntary Arrangement early?

If your circumstance change or you receive a large windfall whilst completing your IVA, you may be able to settle early.

The offer will have to be made by your Insolvency Practitioner (IP) who will write up a proposal and put it to your creditors. This is known as Variation, and for it to be agreed, at least 75% of creditors that respond have to say yes to it.  

What happens at the end of my Individual Voluntary Arrangement?

When you apply for an IVA, it can be hard to see the end goal, but the last year of your IVA is an exciting time. As you’re approaching the end of a 5 or 6 year period sticking to a budget and keeping up your monthly payments, the end is in sight and you’re almost debt free!

Your Insolvency Practitioner (IP) will check that all payments have been made on time and in full, and once confirmed, you will receive an IVA completion certificate. You won’t have to notify creditors, but we do recommend checking the public insolvency register and querying it if you haven’t been removed 3 months after completion.

What happens if an Individual Voluntary Arrangement fails?

An IVA is a legally binding contract between you and your creditors, failing to make your payments under your agreed-upon terms, could see your IVA terminated and allow your creditors to contact you for payments. Luckily, there are many steps taken before an IVA fails and there are ways that we can help, including reviewing payment terms and offering additional support and advice. As always it’s best to speak to our team when struggling with repayments for the best chance to get ahead of your debts.

If an IVA fails, creditors are owed the total amount of debt that remains outstanding and will be free to contact you, and even ask the courts to make you bankrupt. To avoid bankruptcy, it’s important to contact all creditors as soon as possible should the IVA fail, to renegotiate payment plans.

Can I change from a Debt Management Plan to an Individual Voluntary Arrangement?

MoneyPlus Advice will review DMPs at least every 12 months and if it looks like an IVA may be an available solution you can start the application process.

If you are on a DMP and think that an IVA may be more suitable for you, please contact us on 0161 837 4000 and speak to our team who will be happy to help.

What’s the difference between a Debt Management Plan and an Individual Voluntary Arrangement?

Both an Individual Voluntary Arrangement (IVA) and a Debt Management Plan (DMP) are solutions for those who are struggling with unmanageable debt, both involve making reduced, affordable monthly payments to your creditors as part of an agreed plan.

The biggest difference between the two solutions is that an IVA is legally-binding and a DMP is not. With an IVA, once your creditors have agreed to the terms, they won’t be able to take legal action against you (such as petitioning to make you bankrupt, or other court action). They will also be unable to contact you directly – they’ll need to communicate through the licensed Insolvency Practitioner (IP) who is dealing with your case. IVAs also allow you to write off some of your debt, unlike DMPs.

DMPs are not legally binding, so your creditors can still take action against you if you do not keep up with your monthly plan repayments. They are also still free to contact you, however, if you’re using an FCA-regulated Debt Management company such as MoneyPlus Advice, we’ll be sure to help with any creditor contact you receive.

Alternatives to an IVA

*From April 2022 to August 2022 37% of customers achieved a debt write off over 80%, with average write off being 73%. The amount of debt written off is dependent on your circumstances.