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What is an IVA?

An IVA is an agreement entered into by a debtor with his/her creditors to pay off their debts over a set period of time. It is one option a debtor can use to pay off their debts. It is a formal, legal debt solution. This
means it is approved by the court and both the ddebtor and his/her creditors must adhere to the terms of the IVA.  It is an alternative to bankruptcy for a debtor who is in financial difficulty. The main benefit of an IVA is its flexibility and the fact that (unlike bankruptcy) it allows the debtor to retain control of his/her assets.

Who can take out an IVA

An individual, sole trader or partner (in a business partnership).

The Agreement

The agreement sets out how creditors will be repaid and normally involves setting up monthly repayments over a specified period of time. Alternatively, if an asset (such as a property) can be sold, the agreement may specify that the proceeds from the sale will be used as payment and lump sum payments are made in addition or alternatively to monthly payments. An IVA must be set up by a qualified Insolvency Practitioner, who will then deal with the creditors throughout the life of the IVA.

An Insolvency Practitioner will normally assist in working out what the debtor can afford to repay and how long the IVA should last. The IVA will start if creditors holding 75% of the total debt agree to it. For an IVA to be approved, the IVA proposal must usually offer a higher return to creditors than could otherwise be expected were the debtor to be made bankrupt. Once approved, the IVA will apply to all creditors, including any who voted against it.

It is important to note that an IVA can be cancelled by the Insolvency Practitioner if the debtor fails to keep up with repayments.

Are all creditors included

No, only unsecured creditors are included in an IVA, secured creditors such as a mortgage company are excluded. Other types of debts that are excluded from an IVA include maintenance payments, student loans and magistrate court fines.

Further information

If you wish to discuss whether an IVA might be the right solution to your current financial issues please contact us on 03300 244660.