Individual Voluntary Arrangement

If you are in financial trouble and you do not wish to go bankrupt then an individual voluntary arrangement may be a good alternative for you. It can be quite complicated but is a route to avoiding bankruptcy and the disadvantages that go with it. In the past it was normally only used by struggling businesses but now more individuals are taken up the option as well. Unfortunately, in this current economic climate, many more people are struggling financially and this may be an option that they will need to consider.

The individual voluntary arrangement, which is often referred to as IVA was set up in 1986 and is a formal repayment proposal. It is presented to the individuals creditors through an insolvency practitioner. It tends to be a flexible plan which allows the individual to pay back their debts at a rate that they can afford. It is calculated taking in to account the income of that individual, the assets they hold and any other money that they have coming in. There income and outgoings are calculated and then any money left over is used to pay off their creditors.

It may be better to consider a debt management plan to organise your finances but if your problems are very serious then it may be better to use the services of the insolvency practitioner to help you to manage your situation.

The reason that many people choose this option over bankruptcy is that they can protect their assets. In bankruptcy everything must be sold, whereas an agreement like this will protect the assets such as the individuals house. Many people think that an IVA does not effect the credit rating in the same way as bankruptcy, but in fact it makes little difference as it is still recorded by credit agencies and listed publicly on the Personal Insolvency Register. An IVA can last up to 5 years whereas bankruptcy only last one year and payments tend to be lower. An IVA will not stop a debtor being able to obtain further credit in the same way that bankruptcy will. It will also not stop the business from trading or having to declare their situation in the same way that bankruptcy does. There are fees to be paid as part of an IVA but these will not have a big effect on what is paid back as it tends to be taken out of what is owed to the creditor. Another advantage of IVA over bankruptcy is that in most cases the individual will not lose their home or be forced to sell.


What is an Individual Voluntary Arrangement UK?

A UK IVA is a legal, binding agreement between your creditors and you, where you agree to pay them a proportion of what you owe them by making regular payments based on what you can afford. Only a licensed professional can set up this arrangement, which means you will need to contact a UK debt management company that will set up the voluntary arrangement for you. As part of this process they will appoint an insolvency practitioner to help you.

The insolvency practitioner will ask you questions about your financial situation. The information is then used to apply for an Interim Order. Creditors representing at least 75% of the monetary value of your debts have to agree to the individual voluntary arrangement for it to be put into force. If you get that agreement, any creditors who do not agree are also bound by it. Since it is legally binding once it does pass the creditors must stick to the arrangement and neither they nor you can easily change their minds.

Who Should Apply For an IVA?

An individual voluntary arrangement is not right for everyone. Some people can better benefit from a debt management plan if they are not deeply in debt. This particular type of arrangement is only available to UK residents. You may want to apply for a voluntary arrangement if:

You have a steady income but have become overcome with debt.
You do not want to lose your particular employment position by filing bankruptcy.
You owe more than £15,000 to several different creditors.
An individual voluntary arrangement does not have such a negative impact on your credit as bankruptcy does. It may not be as serious as bankruptcy since you are making payments to you creditors, but it will stay on your credit report for the duration of the payment period.