Individual Voluntary Arrangements, or IVAs, are an alternative debt solution to bankruptcy which involves an Insolvency Practitioner negotiating reduced debt repayments that you are able to afford. A typical IVA runs for a period of 5 years, after which time any remainder of debt is usually written off.

This article completes our insight into the mechanics of the IVA process to give you an idea of what you would be dealing with if you chose to take out an arrangement of your own.

Once you have agreed upon a revised payment structure and your IVA is in effect it will be subject to an annual review. This includes an analysis of your income and expenditure, complete with supporting evidence. This process is not unlike the process carried out at the beginning of the plan. This is a very useful exercise and ensures that customers and creditors are aware of the financial situation at all times.

Circumstances can of course change over the course of a 5 year IVA process. This could involve the financial difficulties involved with an accident or a redundancy, a relationship separation or childbirth. Any changes to your lifestyle or situation should be discussed with your Insolvency Practitioner during your IVA proceedings because changes to an IVA are commonplace. It is the job of your Insolvency Practitioner to meet with your creditors and discuss any potential changes on your behalf.

If, for whatever reason, you come into money and wish to pay off your IVA early, this is very much possible and is referred to as a Full and Final Settlement. Early settlement of this kind involves paying off the entirety of the original debt, or in some cases a major proportion of it. If you do not choose to use this newfound sum of money to pay off your IVA, your creditors will request a proportion of the lump sum and continue to claim IVA payments.

If your financial situation improves a great deal during your IVA, your creditors will usually request 50% of your increase in earnings to be contributed to the IVA. The exception to this is if the amount of increase in enough to cover a Full and Final Settlement Payment.

At the end of each year after the IVA has been implemented, your Insolvency Practitioner will assess what funds are available in the bank account set up for the IVA.  If there is sufficient money in the account, the Insolvency Practitioner will make a payment to each of your creditors to pay off a further portion of the debt. The fraction of this dividend that each creditor will receive is dependent upon their percentage of the original debt.

At the end of the 5 year IVA period, assuming that the process has been completed satisfactorily, a final settlement payment will be made and the IVA will be closed. The accompanying bank account will be closed and all direct debits will be cancelled.

If the IVA fails, your creditors will be able to pursue you for the full outstanding balance and no credit will be given in relation to any payments for fees within the IVA. Failure could also result in bankruptcy.

An individual voluntary agreement, or IVA, is an alternative to bankruptcy that can help you avoid a very painful financial situation. It is a legally binding agreement between you and your creditors that is designed to match your financial situation. Of course, it would be nearly impossible to set up an IVA on your own, [...]

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