Dealing With Debts, Options Explained

f) Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement more commonly known as an IVA is a legally binding agreement for the satisfaction of debts usually lasting 5 years. It is a genuine method of avoiding bankruptcy while still being subject to a formal debt solution and can be a suitable and sensible solution in some cases. To enter an IVA a debtor would usually have to have at least £15000 of unsecured debt incorporating at least 3 creditors. To propose and set up / administer an IVA the debtor must be assisted by an Insolvency Practitioner who will act as the Supervisor of the arrangement (CAB cannot do these).

Some pros

once entered into an IVA all negotiations etc are handled by the Insolvency Practitioner
creditor pressure removed
interest and charges stopped
one 'affordable' monthly payment (usually for 5 years)
homeowners can almost always keep their homes
avoids the 'perceived' stigma of bankruptcy
substantial amount of debt may be written off

Some cons

homeowners may need to release equity through a re-mortgage in the 4th year of the IVA or extend the terms of the arrangement (usually for an extra year)
damaged credit record (6 years)
failing to stick to the terms of the IVA might result in bankruptcy
if the IVA fails within the first 2 years it is possible that the majority of the money paid in will have gone in fees
details of IVAs are available to the public via the Insolvency Service Register
possible problems with employer
tenancy agreements may include an insolvency clause (risk to home)
tight budget with regards to disposable income
certain debts cannot be included including - fines / CSA / mortgages

If you decide on an IVA as a method of dealing with your debts, you should consult several Insolvency Practitioners and compare what they charge (some don't charge up front fees) before asking any of them to act on your behalf. Insolvency Practitioners are usually accountants, some are solicitors and their fees are similar to those charged by members of these professions for other kinds of work. We believe IVAs can be difficult and complex procedures that need to be carefully explained with considerable face to face discussion between the debtor and a fully qualified Insolvency Practitioner. We do not believe an IVA is something that can be dealt with solely via a telephone conversation and would advise clients to take this into account before choosing an Insolvency Practitioner.

Regrettably, we have seen clients who have been offered or entered into IVAs which they do not fully understand. In some cases it has been disturbingly clear that other more suitable and considerably less expensive options (for example bankruptcy) have not been fully explored. We would therefore strongly advise that anyone with debt problems get advice on all the options & solutions available from a free independent agency such Citizens Advice or CCCS before deciding on an IVA.

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