Getting an IVA

Once you have decided that an Individual Voluntary Arrangement is the right solution for you, there are a number of steps that need to be undertaken to get the agreement in place.

1. Calculate what you will have to pay

Your IVA payments are based on your disposable income.

Disposable income is the amount you can afford to pay your creditors after your reasonable monthly living expenses have been taken into account.

The amount you are asked to pay into your IVA each month will never be more than you can afford. However, you will normally be required to pay a minimum amount so that your creditors are paid back at least 25% of the debt that you owe.

If you cannot afford to pay back at least 25% of your debt either through your monthly payments over five years, or a combination of monthly payments and equity release from your property, then an IVA may not be for you.

How to Start

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2. Draft the IVA proposal

Once the monthly payments you can make have been calculated and agreed, your Insolvency Practitioner (IP) will draft your IVA proposal.

This is the offer to your creditors. It details all of your personal financial details including who you owe money too and how much you can pay back.

Once both you and your IP are happy with your proposal, it will be sent to each of your creditors for their review and acceptance.

3. IVA agreed by the creditors

Your creditors are given a minimum of two weeks to review your IVA proposal. After this time a Creditor’s meeting is held. The meeting is an opportunity for your creditors to discuss your proposal and agree it.

Although your creditors are invited to the meeting, it is very rare that they will actually attend in person. More usually they will write to your IP to register their vote to accept or reject the proposal.

In order for the IVA to be accepted, at least 75% of the value of the creditors who vote must agree to the proposal.

There is no guarantee that an IVA will be accepted by the creditors. However, given the time and effort required for the Insolvency Practitioner to draft the proposal, they will not undertake this necessary work unless they are very confident that the proposal will be successful.

4. Start paying your IVA

Once your IVA has been accepted at the creditors meeting, it becomes legally binding on both you and your creditors.

At this point, your creditors must stop all actions against you to collect the debts that you owe. They are not allowed to add further interest or charges to your accounts. In addition, if you have a county court judgement (CCJ) or attachment of earnings issued against you, these are overturned by the IVA.

You must start to make the payments agreed in your IVA proposal. Given that you do this and stick to your agreement, at the end of your IVA any outstanding debt will be written off and you will be debt free.