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The IVA Process
Individual Voluntary Arrangements (IVAs)
The IVA (Individual Voluntary Arrangement) was introduced by the government in 1986. It was designed to be an alternative to bankruptcy that would benefit both the debtor and the creditor.
An IVA enables those facing serious debt problems to reach a formal agreement with their creditors to repay a reduced percentage of the debt over a period of time.
If an IVA is agreed, the debtor only has to repay an agreed percentage of their debt (usually at least 30% of the debt) and interest on the loan is frozen.
The IVA provides an excellent way for those struggling with debt to avoid bankruptcy and to make a fresh start.
This section provides an overview of the IVA process. Although we hope that it will answer all your questions, if you’d like to talk to an impartial IVA advisor free of charge, please:
a) Call us on freephone 0800 138 5445
or
b) Fill in this short form and an IVA advisor will call you back at a time that is convenient to you
An Overview of the IVA Process
1. First you need to find an insolvency practitioner to set up the IVA for you.
Our independent IVA advisors can help find you a reliable one. Click here to contact an IVA advisor. This service is free of charge.
2. The insolvency practitioner will then prepare an IVA proposal document containing details of:
- Your personal circumstances
- Your financial position, assets and liabilities; and
- How you propose dealing with your creditors.
3. Once the IVA proposal has been finalised, the insolvency practitioner files an Interim Order with the court. After this point, your creditors are not allowed to issue bankruptcy proceedings against you until your creditors have decided whether to accept or reject your IVA.
4. The insolvency practitioner circulates a “Nominee’s Report” amongst the debtor and creditors. This report contains a professional opinion about the IVA being proposed and whether a creditors’ meeting should be called.
5. The creditors then discuss the IVA and vote on whether or not to accept the it. A vote of 75% in favour is needed to accept the IVA. The decision to accept the IVA legally binding on all the creditors.
6. The creditors appoint a supervisor to administer the IVA and ensure that the creditors get paid according to the agreed terms.
How Long is the IVA Process
The process of applying for and setting up an IVA generally takes about 60 days. This includes things like collecting evidence; drafting the IVA proposal, sending the proposal to the creditors and waiting to hear whether or not it has been accepted.
Normally debtors will only need to take part in small activities like providing evidence and signing the relevant documentation.
The IVA Proposal
The IVA that is proposed to the creditors is based on what the debtor can realistically afford to pay over a five year period. In the majority of cases, it is be made up of 60 monthly payments. However, it can also include lump sum contributions such as from the release of equity from a home.
When the IVA has been agreed, it generally runs for five years. During this time payments are made on a monthly basis into an IVA fund governed by the supervisor.
Whilst an IVA is in place, the creditors have to freeze all interest on the debt.
After five years, if the IVA has been completed according to the terms of the agreement, then all of the debts are deemed to have been cleared.