subject: What Is An Iva, Am I
Eligible & How Effective Is It? [print this page] An Individual Voluntary Arrangement is a legally binding agreement designed to help you repay as much of your unsecured debt as possible - and write off what you can't afford to repay in a realistic amount of time.
Basically, it's an agreement between you and your unsecured creditors: if you can agree on the terms, you will - in most cases - commit to making reduced monthly payments for five years (60 months), and your creditors will agree to accept your payments, not to take any legal action against you, and to write off all your outstanding unsecured debt once the agreement comes to a successful conclusion.
IVAs - how do they work?
If you think that an IVA could help you tackle your debts, you should contact an Insolvency Practice.
If, after speaking to them, you find that it is right for you and decide to enter one, you will work with an IP (Insolvency Practitioner) to draw up an IVA Proposal, which provides your creditors with information about how you propose to repay as much of your debt as you can - assuming it is agreed.
It's then up to your lenders to vote on your Proposal. For it to go ahead, voting creditors accounting for at least 75% of your debt would have to agree to it. If they do, it will become legally binding on everyone - including those who voted against it, or who didn't vote at all.
Once your IVA has begun, you will make just one payment per month to your IP. They will subsequently pass on a portion of this money to your lenders based on how much you owe each of them. The payment you make will be based on what you can realistically afford after you've taken your essential expenses (mortgage/rent payments, utility bills, food bills, etc.) into account.
In general, you will make your payments for five years, and if you are a homeowner you may be required to release some of the equity in your home half way through the final year of the agreement, so you can repay more of your debt.
Finally, once you have made your final payment, the IVA will come to a successful conclusion. Your unsecured creditors will write off all the remaining debt, and you'll be legally debt free (in terms of unsecured debt - an IVA can't write off some forms of debt, such as mortgages).
Please note that entering an IVA will damage your credit rating for 6 years - which could make it harder and/or more expensive to obtain credit during that time.
Would I be eligible?
Finding out if you are eligible isn't down to a checklist - you will have to speak to an Insolvency Practitioner. But if you are struggling with significant unsecured debts that you can't afford to repay within a reasonable amount of time (but that you can commit to making regular reduced monthly payments towards), you could be eligible for one.
How effective is it?
Providing you can stick to your side of the agreement, an IVA can be a very effective debt solution. You will - in most cases - be legally debt free in 5 years, and will have the portion of your debt that you can't afford to repay written off.
But that doesn't mean it is right for everyone - it's important to talk to a debt expert and explore all your options before you make up your mind about how you're going to tackle your debts.
