An IVA or Individual Voluntary Arrangement is a repayment plan that helps debtors with large amounts of debt to repay a reduced amount of what they owe. It is a legally binding agreement between you and those that you owe money too. Some debts, including your mortgage, cannot be included in the agreement and you will be expected to repay this amount in full. The amount of money that you owe under an IVA will usually be reduced by up to 75% following agreement with your creditors.
An IVA is meant as an alternative to bankruptcy and while it can help greatly reduce debt levels, there are pitfalls and negative aspects to an IVA. The IVA will usually stay on your credit record for a period of 6 years and you will find it more difficult to obtain credit during this period. However, if you are in such a position where an IVA is your best option then you are unlikely to be able to successfully apply for credit during this kind of time period anyway.
The IVA is a formal agreement so a failure to meet an agreed repayment means the IVA could fail. It is also unlikely that you will be able to make small changes if you are struggling to live within the terms of your IVA, although a major change such as a change in employment means that you may be able to amend the terms of your agreement.
In order to be eligible for an IVA you typically need to have a minimum of £10,000 unsecured debt. Usually, this debt will be with a number of creditors although agreement may be reached with a single creditor to reduce debt, if it is in the best interest of the company concerned. A minimum repayment of £100 per month is normally required; however, the more money you owe, the more you will usually be required to pay.
You will need to use an Insolvency Practitioner who will aim to make arrangement with you and your creditors in a bid to make payments against your debt. They will look at your personal circumstances, determine how much you can afford to pay after necessary household expenses, and how much creditors are willing to accept. Using an Insolvency Practitioner will improve your chances of having creditors come to an agreement over the money that you need to repay.
An IV, or Individual Voluntary Agreement is meant as an alternative to bankruptcy that will help a debtor clear debts of £10,000 or more, typically over a period of 5 years. It is a formal agreement and it is necessary to stick to the agreement once made. It can help you become debt free and meet agreed regular repayments once the terms have been agreed.