What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a formal debt solution for people living in England, Wales or Northern Ireland.
An IVA can only be proposed through and administered by a licensed Insolvency Practitioner and as part of his role the Insolvency Practitioner acts as supervisor over the arrangement.
Introduced as part of the Insolvency Act in 1986, IVAs were created to act as an alternative to bankruptcy for anybody suffering an overwhelming debt problem yet wanted to avoid the full consequences of bankruptcy.
An IVA introduces a new repayment schedule that is based on affordability for the applicant, ensuring that the applicant's personal living costs are taken into account before the IVA payment is agreed.
Once the IVA has been agreed, creditors are legally obliged to freeze interest payments and to stop charging late payment penalties on any outstanding debts. They must also agree to refrain from contacting the applicant for the duration of the IVA.
An IVA has a fixed term, which is normally 5 years, after which all payments into it stop. At the end of the IVA the applicant is completely debt free, with any outstanding balances being legally written off under the terms of the agreement.
An IVA offers people protection over their assets, which may otherwise be vulnerable under bankruptcy proceedings, such as any equity in their home
An IVA also acts as an alternative to bankruptcy for those people whose profession precludes bankruptcy as a debt solution, such as people serving in the Armed Forces, the Police Force, the Prison Service, and certain professions working within the Legal and Financial sector.
An IVA is considered to be a private arrangement because even though it will be recorded on the insolvency register, unlike bankruptcy, is not advertised in the press
An IVA will have a negative effect on the applicant's credit rating for 6 years from the start date of the IVA, during which time the IVA applicant will find it extremely difficult to gain further credit. However, once this time period has passed, the applicant will soon regain the ability to successfully apply for credit.