Individual Voluntary Arrangement (IVA)

This solution involves an Insolvency Practitioner negotiating a proposal for repayment of debts with creditors. It normally lasts five years and is a court ratified document.

Strengths: If you are unable to afford your full repayments to creditors it will enable you to become debt free at the end of the arrangement (normally 5 years). An IVA allows interest to be frozen, will write off a proportion of the debt and does not exclude someone in an IVA from remaining or becoming a company director. It will allow you to keep your home if you maintain mortgage repayments and will allow you to keep your vehicle.

Weaknesses: It is essential to make the regular monthly repayments as failure to make repayments on your IVA could result in your creditors petitioning for your bankruptcy. Creditors have the opportunity to vote against the proposal and therefore this solution cannot be guaranteed. Full disclosure of assets and finances are necessary. It will affect your credit rating and much like bankruptcy, your name will be added to the government’s online Insolvency Register but for the duration of the IVA (normally five years); repayments are reviewed on an annual basis and repayments could increase; most IVA’s will require 100% of any disposable income; if you are a homeowner, many IVA’s will include a clause that involves remortgaging your home in the fourth year and paying a large percentage of any monies raised into

IVA - real life story

Mr R’s financial problems began when he and his then wife bought a house that needed extensive renovation works. The stress of the continuing borrowing and renovations with Mr R working extra overtime in order to meet all of the financial commitments resulted in Mr and Mrs R splitting up. The majority of the debt was in Mr R’s name and he found he couldn’t support himself and the £67,000 debt he had accumulated. There was substantial equity in the property meaning bankruptcy was not an option as there was the possibility the Official Receiver would have pursued Mrs R for a share of the equity as Mr R had been in part ownership in the previous five years. An IVA seemed the most obvious option to spare his ex wife selling the property and looking to rehouse herself and the three children, particularly as Mr R had sufficient income to accommodate the proposed IVA payments from his reasonably well paid and secure employment.

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