What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) enables you to make a formal proposal for payment to your creditors through an Insolvency Practitioner. The proposed payments will be less than the full amount of the debt owed but your creditors would be accepting the offer in full and final settlement of their claim.

Your creditors have the right to vote whether to accept or reject your proposal but where they vote to accept it, a legal agreement is created which is binding on you and your creditors. The proposal will be tailored to meet your individual circumstances but typically would involve you paying a monthly payment, a lump sum or some combination of the two. Proposals can also take account of erratic income such as overtime or bonuses.

You might consider an IVA as an option for one of two reasons: -

• To avoid Bankruptcy where that is considered too drastic a step and where a realistic proposal for payment can be made.

• Where the option to make reduced payments would result in an unreasonably long repayment period to clear the debts in full.

What are the advantages of an IVA?

• Creditors will be bound by the arrangement even if they did not vote in favour (75% by value of creditors who do vote have to vote to accept for the proposal to succeed).

• You will know from the start how many months you will be paying for (usually 5 years if making monthly payments).

• It may be possible to make more favourable arrangements than under Bankruptcy to retain assets such as the family home.

• There are fewer restrictions than apply in Bankruptcy e.g. to carry on a business or to work in certain professions.

• Unlike Bankruptcy an IVA is not reported in local legal notices.

• Individuals may also feel it carries less of a stigma.

Are there any disadvantages to an IVA?

• Any assets such as equity in a property will be taken into account and you would need to discuss with the Insolvency Practitioner how this might impact on your individual circumstances.

• The arrangement is binding on you as well as your creditors. If you were to default on the arrangement then the Insolvency Practitioner can petition for your Bankruptcy.

How do I get an IVA?

The normal way to obtain an IVA is to approach an Insolvency Practitioner. The Insolvency Practitioner will act as "Nominee" until the IVA is formally approved and as "Supervisor" during the remaining term of the IVA. CCCS can recommend one who we know will be happy to discuss with you free of charge and whose standards of service have been approved by CCCS. Although the Insolvency Practitioner charges fees for setting up and managing the arrangement these will come from the amount(s) you agree is to be made available to the creditors. The only costs you will have to pay before an arrangement is set up are fees of £120 in obtaining the Interim Order.

You could also find an Insolvency Practitioner yourself by looking in your local Yellow Pages but in this case make sure you understand their charging structure before making any payments as some may charge fees whether the arrangement is successful or not.