An Individual Voluntary Arrangement (IVA) is a legally binding arrangement made between you and your creditors in which you agree to pay a proportion of your monthly income towards the debt for a fixed period of time (usually five years).
After this time, so long as you have made all your repayments as per your arrangement and upon satisfactory conclusion of the arrangement, the remainder of the debt is written off by your creditors.
Am I eligible for an IVA?
To be eligible, you would normally have unsecured debts of more than £15,000 and creditors numbering two or more.
The types of credit that can be included in an IVA include credit cards, store cards, unsecured loans, catalogue credit and overdrafts. However mortgages, secured loans and Hire Purchase agreements are excluded from an IVA.
You should also normally be in employment, because an IVA is based on your ability to repay a certain amount of the debt each and every month.
How long does it take to set up an IVA?
This depends largely on how quickly you can gather all the information required so that we can present a repayment proposal to your creditors that is accurately based on your income and expenditure and any other relevant factors that can help explain why you’re having difficulty in repaying your debts.
Payplan’s easy-to-understand client-friendly processes mean that some people have enjoyed the peace of mind an IVA brings less than four weeks after first contacting us. It may typically take anywhere between five and eight weeks to set up an IVA, from first contact to approval.
What's the difference between a Debt Management Plan (DMP) and an IVA?
A DMP is an informal agreement made with your creditors to repay all of your debts, usually at a reduced rate, for as long as it takes until your debt is fully repaid. A DMP is not a legal agreement, so while creditors may agree to a request to freeze interest, charges and stop requests for repayment, they’re not under any legal obligation to do so.
An IVA is a legally-binding agreement that allows you to make repayments to your creditors at an affordable rate over a fixed amount of time (usually five years). Your creditors are legally obliged to freeze interest, charges and stop making requests for repayment, so long as you keep to the terms of your arrangement. Once you have made all your payments after the fixed period of time, your creditors will write off the remainder of the debt.
What are the advantages of an IVA over bankruptcy?
Arranging an IVA rather than filing for bankruptcy gives you several advantages.
You can often still hold certain public offices while in an IVA that bankruptcy would prevent you from holding; such as Member of Parliament, Justice of the Peace, governor of a school, member of a Local Authority, or a company director.
During a bankruptcy period the Official Receiver can sell any assets you own in order to go towards repaying your debts, including your home, car and non-essential household effects; an IVA protects such assets so you won’t be forced to sell them (although you would be expected to downgrade certain luxury items).
An IVA may also protect you if you are working in a profession that might exclude or place restrictions on bankrupts; such as accountancy and law professions, the police force, armed forces, local councils and government offices.
What is the IVA success rate?
Once your IVA has been approved, the success of your IVA is entirely dependent on you because IVA payments are based on your ability to pay. If you keep to the terms of the IVA and keep making your payments into the arrangement, then you will be debt-free upon successful completion.
This gives you stability and control over your finances, and many people find this gives them valuable peace of mind.
Is your bank account affected by an IVA?
If you have any bank accounts that are directly related to your creditors (bank loans, for example) then it makes sense to open a new Basic Bank Account with a completely different banking organisation to protect your income.
Payplan can explain how you can open a new Basic Bank Account that will protect your money.
Can I be a company director with an IVA?
All individual circumstances are different of course, but as a general rule having an IVA shouldn’t necessarily prevent you from being a company director. Whereas filing for bankruptcy would ordinarily certainly prevent you from being a company director.
Can I have a pension whilst in an IVA?
Entering into an IVA won’t affect your State Pension, although payments into your personal pension are treated as a non-essential expense, and your creditors will probably expect that what you had been paying into a personal pension should be paid to them as part of your IVA.
There may be certain exclusions to this, and you should seek more information from Payplan.
What happens if I default on an IVA?
If you stop paying money into your IVA arrangement and your IVA subsequently fails, then your creditors will almost certainly resume their letters and telephone calls requesting you repay them as per the original terms of your credit agreement.
This means creditors are likely to re-apply any interest charges that were frozen when you entered into the IVA arrangement, and may well seek further legal action against you if you subsequently find it difficult to repay as per the original terms of the credit agreement.
Will my partner be affected if I enter an IVA?
It can be a worry for the partner of someone who has entered into an IVA, but credit files these days are becoming increasingly sophisticated in order to separately score individuals, even if they’re living in the same address.
One thing that may be problematic is if joint finance had been taken out and then included in the IVA. For any such joint debt, once the first party stops paying the previously agreed amount, the other named person would be pursued for the remainder of the payment.
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