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IVAs (Individual Voluntary Arrangement)

An Individual Voluntary Arrangement, or IVA, is a formal way to settle your unsecured debts. Now, to be eligible for an IVA you must be insolvent - in other words be unable to repay your debts when the repayments fall due. This is why IVAs are generally used as an alternative to bankruptcy. But unlike bankruptcy, an IVA doesn't put all your assets at risk, but equity in your property will be taken into consideration in the final year of the IVA.

There were 31,527 individual insolvencies in the first quarter of 2019. Although total individual insolvencies fell in this quarter, they remain elevated compared with recent years and increased 15.9% compared to the same quarter in 2018. There were 20,325 IVAs, a decrease of 11.4% compared to a record high in Q4 2018. Compared with the same quarter last year, IVAs increased by 23.7%. IVAs accounted for 64.5% of total individual insolvencies followed by DROs (22.3%) and bankruptcies (13.2%). Since Q3 2011, IVAs have been the most common individual insolvency while bankruptcies fell after the introduction of DROs in 2009.

An IVA is a binding agreement to repay your creditors at a rate you can afford over a certain period of time, which is usually five years. If you have at least £100 of disposable income each month, it could be a great way for you to pay off unsecured debts that have built up in a fixed timeframe with substantial debt relief.

Now, to be eligible for an IVA, you need to have at least £10,000 of unsecured debts and have at least three lines of credit. And it's important to remember that the IVA will show up on a public register and on your credit file.

Atlantic Financial Management will appoint your insolvency practitioner, who is licensed and regulated under insolvency law to set-up and supervise the IVA. There are many advantages of an IVA which include the peace of mind that even if one or more of your creditors vote against your IVA they are still bound by it, if the majority approve your proposal (i.e. 75% of the voting creditors by value of debts represented).

Once approved, an IVA will stop those chasing phone calls, collection letters and legal enforcement actions from your unsecured creditors. Interest is usually frozen as long as you keep up with your payments. You should be able to continue running any business you have.

Once you've completed your IVA, any remaining unsecured debts are written off. If this sounds like the right debt solution for you then find out more about starting an Atlantic IVA right here.

Important points to remember:

  • An IVA is entered on a public register.
  • Whilst on an IVA and for a year after completing it your credit rating will be affected - an IVA may last 5 years but the effect on your credit rating will last 6 years and potentially longer if the term of your IVA is extended
  • homeowners may be required to release equity to pay off some or all of their debts. Where a homeowner is unable to obtain a remortgage, the IVA can be extended for up to 12 months
  • if a homeowner has to remortgage their property to release the equity, their ability to obtain a mortgage may be restricted and likely to be on less favourable terms (e.g. much higher interest rates)
  • If your IVA fails, you may be made bankrupt and you remain liable for the balance of your debt and any Insolvency Practitioner fees and costs already incurred
  • there are restrictions on your expenditure whilst in the arrangement, Expenditure allows are generally calculated using the Step Change (formerly CCCS) trigger figures
  • On completion of your IVA, it is important to ensure that all credit agreements are shown as 'satisfied' on your credit file and that the public record no longer shows your IVA. This is a major step to improving your credit worthiness.
  • Satisfied default records on your credit file should be deleted six years from the date that the IVA was put in place with the court