IVAs – Who Are They Appropriate For?
For more information about IVAs and further help and advice visit http://www.ivaforum.org.uk/
If you are struggling with a high level of unsecured debt that you cannot afford to repay within a realistic timeframe, then an IVA (Individual Voluntary Arrangement) may be appropriate for you.
IVAs – what are they?
An IVA is a legally binding financial agreement between you and your unsecured creditors. To be eligible for an IVA, you must, in most cases, be able to commit to making regular monthly payments over the course of the agreement (which would probably last for 5 years).
If enough of your creditors agree to the terms of the agreement, they will stop any legal proceedings against you (if there are any in progress) – and agree to write off any outstanding unsecured debt once the IVA comes to a successful conclusion.
Please note that entering an IVA will damage your credit rating for 6 years from the time it starts – which could make further credit harder and/or more expensive to obtain during that time.
IVAs – how do they work?
Before an IVA can go ahead, voting creditors accounting for 75% or more of your unsecured debt would have to accept the terms laid down by you and your IP (Insolvency Practitioner) in your ‘IVA proposal’.
Because IVAs are legally binding debt solutions, once your IVA has begun your creditors would not be able to change the terms of the agreement, or back out of it altogether – providing you stick to your side of the agreement.
In general, you will be required to make regular reduced monthly payments for 5 years. However, this depends on the terms of the agreement and whether you miss any payments throughout its duration. Your creditors will each receive an agreed amount of this money, depending on how much you owe each of them (this is called a pro rata payment).
If you are a homeowner, you may be required to release some of the equity in your home during the 54th month (half way through the final year) of the agreement. This money will be put towards repaying your debts.
Once you have made your final payment (usually in the 60th month of the agreement), the IVA will come to a successful conclusion and any remaining unsecured debt will be written off.
As with any debt solution, it is important that you contact a professional debt adviser before deciding that an IVA is the right way for you to tackle your debts. They will be able to assess your situation, explain all the ‘ins and outs’ of an IVA, and talk you through any alternative options you may have.
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