Be aware that some companies will agree to set up an Individual Voluntary Arrangement even it is not suitable for you. They may charge high fees.
An Individual Voluntary Arrangement (IVA) is a formal arrangement made through the county court where you agree to pay an agreed amount off your debts over a fixed period, for example 5 years.
The rest of your debts are then written off after your final payment on the IVA is made.
If you receive a sum of money that could pay most of your debts, such as a redundancy, retirement, or insurance pay out, you could consider a full and final IVA. This is where a one-off payment of less than the balance you owe is made to settle your debts with any remaining debt written off.
Eligibility
You need to have a disposable income without paying any of your non-priority debts. This is at least £80 per month for a low contribution IVA, or at least £200 per month for a standard IVA.
How it works
You need to make an application for an IVA through an Insolvency Practitioner (IP).
The Financial Inclusion Team can give you the details of who you can contact.
If your IP agrees that an IVA is the best option, they will help you complete a financial statement and prepare proposals for your creditors.
The agreement must be agreed by most of your creditors (by value).
You make the agreed payments in line with the court’s terms.
There is a cost to administer an IVA. This comes out of your regular payments. Some IP’s charge an additional up-front cost to fully assess you for an IVA and take you through the whole process.
Always ask about charges before starting the process. You could make your situation worse if you have any fees to pay that you have not planned for.
Advantages
Alternative to bankruptcy.
Not publicised.
You aren’t bound by bankruptcy restrictions.
You can continue to run a business.
Assets like your home can be excluded if creditors agree.
Creditors are bound by the IVA even if they voted against it.
Usually lasts a maximum of 5 years.
Most insolvency practitioners allow fees to be paid on a monthly basis as part of the IVA.
Disadvantages
An IVA will affect your credit rating.
You must have high available income, lump sum or asset.
Costs are high and the insolvency practitioner may want payment up front.
You may still be made bankrupt if the IVA fails because your payments are set to high.
Your IVA’s may end if you circumstances change and your IP can’t get creditors to accept new terms.
Many IVA’s have a built-on requirement to revalue your home and release any equity to pay your creditors, usually after 5 years of payments. This only applies if your own your home.