Individual Voluntary Arrangements (IVAs)

An Individual Voluntary Arrangement (IVA) is a formal agreement between an individual and their creditors to repay debts over a fixed period, typically five to six years. IVAs are a popular debt solution for individuals struggling with unmanageable financial obligations, allowing them to avoid bankruptcy while making affordable payments based on their income and expenses.

What is an IVA?

An IVA is a legally binding arrangement designed to help individuals regain financial control while ensuring creditors receive a portion of the outstanding debt. Once approved, all included creditors must adhere to the terms, and interest or charges on debts are typically frozen.

An IVA can be a suitable solution for individuals with unsecured debts such as credit cards, personal loans, and overdrafts. It is not available for secured debts like mortgages or hire purchase agreements.

How Does an IVA Work?

Assessment of Finances

A licensed Insolvency Practitioner (IP) will review income, expenses, and total debts to determine affordability.

Proposal to Creditors

The IP drafts an IVA proposal outlining repayment terms, usually involving affordable monthly contributions.

Creditor Approval

The proposal is sent to creditors for voting. At least 75% (by debt value) of creditors must agree for the IVA to be approved.

Repayment Period

If approved, the individual makes agreed monthly payments to the IP, who distributes funds to creditors.

Completion of IVA

At the end of the term, any remaining eligible debt is written off, allowing the individual to start fresh financially.

Advantages of an IVA

  • Legal Protection – Once approved, creditors cannot take legal action or pursue additional payments.
  • Fixed Repayments – Monthly payments are based on what the individual can afford.
  • Debt Write-Off – Any remaining unsecured debt at the end of the IVA term is written off.
  • Interest and Charges Frozen – Additional interest and penalties on debts are usually stopped.
  • Avoids Bankruptcy – Unlike bankruptcy, an IVA allows individuals to retain assets like their home and avoid restrictions associated with bankruptcy.

Considerations of an IVA

  • Credit Impact – An IVA is recorded on the individual’s credit file for six years, affecting their ability to obtain credit.
  • Strict Budgeting – Disposable income is used to repay debts, meaning financial restrictions for the duration of the IVA.
  • Asset Consideration – Homeowners may be required to release equity from their property in the final year of the IVA.
  • Employment Implications – Certain professions may have restrictions on individuals in an IVA, such as financial services or law.

Is an IVA Right for You?

IVAs are a viable option for individuals with multiple unsecured debts who have a steady income and can commit to regular payments. If you are facing financial difficulties and considering an IVA, seeking expert advice is crucial to understanding all available options.

Get Expert Advice Today

At DCA Business Recovery, we provide confidential and professional advice to help you navigate debt solutions, including IVAs. If you’re struggling with debt, contact us today to discuss your situation and find the best way forward.

Further Guidance

For additional support, explore our FAQs for quick answers to common questions about Individual Voluntary Arrangements. You can also download our PDF guides for clear, practical guidance on each step of the IVA process. These resources are designed to help you make informed decisions and successfully manage your debt repayment plan with confidence.

Frequently Asked Questions

Due to the amount of work required to prepare a proposal to be sent to creditors we advise that a period of 4-6 weeks from initial instructions to providing the final proposal to creditors.

The IVA proposal will be drafted and drawn up by a Licensed Insolvency Practitioner (IP), who will have a meeting with you and initially will be an advisor to you to advise you on the procedure and advantages and disadvantages of the IVA compared to Bankruptcy. Once you decide to start with an IVA, the IP will then be the Nominee to your IVA and this is before creditors vote on your IVA proposal. If creditors vote to accept the IVA proposal, the IP will then be the individuals Supervisor in the IVA.

We will prepare the proposal based on information provided by the individual and a monthly income and expenditure will also be prepared, which will show the amount that is manageable to be repaid to the creditors on a monthly basis.

No, but there are matters to consider if the individual owns their own property. In an IVA the individual will keep their assets, unless they agree to put any assets in the IVA. However, if the individual owns a property, whether this is in their own name, or owned jointly, any equity in the property will be looked at by the Supervisor of the IVA and creditors will normally insist that a modification is put into the IVA proposal to deal with any equity that will be available to creditors. The property is usually valued in the final year of the IVA and the equity available will be discussed with the individual. This could result in the individual having to remortgage their property, or to introduce a lump sum into the arrangement, but this should not result in the property being sold. If the equity available is less than £5,000, then the equity in the property may be exempted in the IVA. If the individual cannot afford to re-mortgage the property, then they will need to provide proof of this and it could mean that the IVA is extended for a further 12 months and the individual will be expected to pay a further 12 months of voluntary contributions. When a property is owned by the individual, whether jointly or solely, this will be discussed in detail with the IP before you agree to proceed with the IVA proposal.

For the IVA to be accepted, it will require 75% (in debt value) of your creditors voting on the proposal to agree the terms. If no creditors vote on the proposal, then the decision can be adjourned for up to 14 days to obtain the creditors votes.

If the proposal is accepted by 75% (in debt value) of creditors voting on the proposal, then the arrangement is accepted and as such all creditors are bound by its terms.

Creditors can put forward modifications to the proposal when voting, but the individual will need to agree to any modifications. This will also be dependent on the value of the vote the creditor has.

If the individual misses 3 monthly payments, in any 12 month period and these do not have to be consecutive, then the Supervisor (Insolvency Practitioner) may have to report this to creditors which can lead to the Supervisor petitioning the court for the individuals bankruptcy. If the individual also fails to comply with the terms of the IVA, this can lead to the IVA failing and being made bankrupt.

My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous
Everything was dealt with promptly, very happy with the service and always able to contact Luke and Keely.
IVA Client
DCA are absolutely fantastic and professional and I felt I was able to contact them at anytime.
IVA Client
I know Debbie and Luke Cockerton very well. They are my favourite insolvency people mainly because they actually help my clients rather than just bayonetting the wounded and stealing their gold teeth as some insolvency people seem to do.
Accountant Contact
I benefitted directly and notably by the experience and professional knowledge applied without hesitation to my problems by the staff of DCA within a most friendly operation. The situation was dealt with efficiently, courteously and sympathetically to my personal position.
IVA Client