An IVA is an ‘Individual Voluntary Arrangement’.
The IVA Agreement
This is a complex name for a simple agreement that is drawn up between yourself and the people you owe money to (your creditors)
The Role of an Insolvency Practitioner
Even this isn’t quite true. The IVA agreement is actually made using a ‘middle man’ – an independent person who acts on behalf of yourself AND your creditors called an Insolvency Practitioner. Only a licensed Insolvency Practitioner can perform this role, you are not allowed to do it yourself.
Firstly, your appointed Insolvency Practitioner speaks with you (in person, over the phone or by email) and you tell them how much you owe and to who (credit card company, bank etc). You also have to tell them how much you earn each month and how much you need each month to live a basic life.
The Insolvency Practitioner meets with all the people you owe money to and explains your circumstances. During that discussion they come to an agreement as to how much you can afford to pay each month. For example – if your monthly payments to your creditors are £800 and you need £1,500 to live but you only earn £1,800 it means you cannot afford to pay your debts. You need to cut your payments by £500 per month to break-even. Your creditors will see that if no agreement can be reached you would be likely to go bankrupt and they would get nothing – so an IVA is usually agreed to. They cut the amount you owe them, but at least they get something!
The IVA agreement is put in place and you make reduced monthly payments to your Insolvency Practitioner who shares the money out between your creditors.
The agreement is usually for 5 years, after which you are completely debt free.
You never need to meet with your creditors and they are no longer allowed to contact you. All the work is done by your Insolvency practitioner, but they do charge a fee for this, which is included in your monthly payments.
In an IVA you have to tell your practitioner if you start to earn more money – in which case your monthly payments will rise, but if your income reduces you payments can also be reduced (the IVA is renegotiated)
Once you exit your IVA you are debt free, but it will be recorded on your credit file for 6 years, which might make it difficult for you to obtain credit for that period of time.
So, in summary. An IVA is usually a good option for you if you have a job but owe more than you can afford to pay.
On this site you will be able to find a local IVA expert that can help you. Don’t worry, they deal with people with debt problems every day and will be kind and understanding.