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Individual Voluntary Arrangemnt

  1. 1 What is it?
  2. Put simply it is a voluntary arrangement with creditors for settling debts.
  1. 2 Purpose & Advantages

  2. Simple and flexible

    Creditors decide whether the proposal is suitable

    Avoids the stigma of bankruptcy

    Peace of mind

    No obligation is carried forward

    The "slate is wiped clean"

    The debtor may be able to retain a greater proportion of his income

    The debtor should be able to keep the matrimonial home

    An interim order protects the debtor while the proposal is being considered by the creditors

    Unco-operative creditors can be bound in to the arrangement by the majority (> 75%)

  1. 3 Conditions
  2. In general terms an IVA will be applicable if a person:-
    1. owes money to two or more different creditors;
    2. has unsecured debts in excess of £12,000;
    3. has the means to make an offer of payment to his/her creditors.
  1. 4 Our Services

  2. We will offer help and guidance and will assess your financial circumstances free of charge.

    If we believe that an IVA is viable, we will prepare a proposal for you based upon your individual circumstances and what you can afford to pay.

    The proposal will be agreed with you and then we will send it to your creditors for their consideration.

    Once the proposal has been agreed by your creditors you will set up a standing order and pay the agreed amount into a voluntary arrangement bank account.

    This will typically be for a five year period. Provided you keep up with the payments, you will be debt free at the end of the arrangement.

    A voluntary arrangement gives full legal protection from your creditors. This means that once in place no one can pursue you for payment. All interest on your debts is frozen from the date the proposal is agreed.

    The only fee would be the first monthly agreed contribution. All future payments are used to clear the balance of our charges and in the repayment of the reduced amount of your debt.

    Typically 70% of your debt is written off which will significantly reduce the amount you owe and the amount you are currently paying to service your existing debt.

  1. 5 Comparison with other options
  2. Unlike under a debt management scheme interest on debts are frozen at the date the arrangement is approved. If a consolidation loan is used to clear debts, interest and set up fees are charged on the amount borrowed. To illustrate:-

    If a debtor owed £30,000 then

    1. IVA - the debtor would typically be required to pay £300/month over 60 months, a total of £18,000.
    2. Consolidation Loan - for £30,000 over the same period at a typical rate of 8.9% APR, then the amount payable would be £621/month. A total of £37,260.
    3. Debt Management Plan - the debtor paid £300/month it would take 460 months to clear a debt of £30,000 given an average interest rate of 10% APR.

An IVA is a serious undertaking, it may damage your credit rating for up to six years. If you own a property it will be safe in an IVA, however you may be required to remortgage and release additional funds for creditors after three or four years.