An individual voluntary arrangement (IVA) is a legally binding agreement between you and your creditors that enables you to repay a proportion of your debts through payments you can afford. The agreement is for a set period of time, usually five years. At the end of this period, any outstanding debt is written off.
If you have been served with a statutory demand for payment, you should consider if an IVA will be a better option for you than being forced into bankruptcy, particularly if you have enough income to pay your creditors a significant amount each month.
You will need to act quickly, as your creditor can start bankruptcy proceedings 21 days after the statutory demand is served. When deciding whether to accept the IVA, your creditors will probably consider if they are likely to receive more of the debt through an IVA than they would under a bankruptcy order.
You cannot apply for an IVA yourself. You will need the help of a qualified insolvency practitioner. Always check the costs of using a private insolvency practitioner. It might be better to contact a debt advice charity, as some provide this service for free.
An insolvency practitioner helps you to prepare a proposal for an IVA to put to your creditors and sets up a meeting to allow your creditors to consider your proposal.
The IVA can only go ahead if enough of your creditors agree. You need to obtain the agreement of creditors whose loans add up to at least 75% of the value of your debt. For example, if your overall debts amount to £20,000 and you owe one creditor £10,000 then that creditor’s vote alone is worth 50%.
If you are a homeowner, in many cases an IVA may allow you to keep your home. However, the agreement may involve your creditors taking a share in any equity you may have in your property.