Individual Voluntary Arrangements (IVAs) were introduced by the Insolvency Act 1986 as a viable alternative to bankruptcy. They provide a solution to people with debt problems without the long term consequences of bankruptcy. It is essentially a formal deal between an individual and their creditors to pay back part or all of their debts over a period of time, in order to avoid bankruptcy or save a sole trader business from failing.
Monthly payments are based on affordability. You will provide details of your income and outgoings and your surplus/disposable income (i.e. the amount you have left over every month) will be the amount you pay each month into your IVA.
Most IVAs last for five years (60 months). However, in certain circumstances, it is possible to make a ‘one off’ offer of a payment to your creditors from, for example, the sale of a property or other assets, redundancy monies or the introduction of funds from a third party, e.g. relative or friend.
Upon the approval of an IVA, you will cease to make payments directly to creditors, and creditors are required to freeze interest and charges. Once the IVA is completed, any outstanding balances on debts will be written off.
An IVA is particularly useful for an individual who risks losing their professional qualifications or practicing licence if they are made bankrupt, e.g. solicitor, accountant, banker etc. You will be expected to make a full and honest disclosure of your assets and liabilities when putting together proposals for an IVA. It is a criminal offence to try and obtain an IVA without full disclosure.
Many people will experience a change in circumstances during the term of an IVA. One of the advantages of an IVA is that the terms can be varied so, if you are in an IVA and this happens to you, you just contact Dunion & Co. straight away and, if appropriate, your creditors will be asked to agree to a variation of the terms of your Arrangement. IVAs can often be successfully concluded early if, for example, you are able to offer a lump sum contribution during the term of the Arrangement from, for example, the sale of a property, an inheritance or redundancy.
We have extensive experience in drafting IVA proposals and will be happy to explain the procedure and formulate any proposals for you.
To discuss an Individual Voluntary Arrangement please contact Dunion & Co. today by calling 01782 828 733 or e-mailing us on firstname.lastname@example.org.
What are the advantages of an IVA over a debt management plan?
- In an IVA creditors are obliged to freeze all interest and charges. There is no such obligation in a debt management plan;
- Once your IVA is approved, any pending/outstanding legal actions are suspended and, as long as you comply with your IVA, no further action can be taken.
- An IVA is a legally binding arrangement between you and all of your unsecured creditors, whereas a debt management plan is an informal agreement.
- The services of a Licensed Insolvency Practitioner are required to propose an IVA on your behalf, the benefit being that Insolvency Practitioners are highly regulated and have years of experience and knowledge.
- At the end of your IVA all remaining unsecured debt is written off. A debt management plan will continue until you have repaid all your debt, including interest and charges.
- Creditors do not have to accept a debt management plan and, if they do, they are not obliged to continue under the terms of the plan. Once an IVA is approved all unsecured creditors, whether they voted for acceptance or not, are bound by the terms of the arrangement.
- An IVA usually lasts for five years, depending on circumstances and progress of the IVA. However, there is no guaranteed end date for debt management plans due to potential interest and charges being levied by creditors.
What are the advantages of an IVA over bankruptcy?
- In an IVA you have control over your assets. If you have equity in your property you may have to seek to obtain a remortgage or make additional payments. However, in bankruptcy you have little control and could lose your property if it has any equity.
- Employment may be affected in certain trades or professions in bankruptcy. This is usually not the case in IVAs.
- You will be able to keep all reasonable assets of value in an IVA.
- You can continue or become a company director in an IVA. In bankruptcy, until you are discharged, you are prohibited from promoting, forming or managing a limited company, unless you have explicit permission from the court.
An IVA is more flexible than bankruptcy. An IVA Proposal is drafted to fit your individual circumstance and, if your circumstances change during the course of the Arrangement, the terms can be varied.