A Guide to Individual Voluntary Arrangements and Their Mechanisms

One viable solution for individuals grappling with overwhelming debt to regain financial stability is the Individual Voluntary Arrangement (IVA). An IVA is a formal and legally binding agreement designed to help individuals manage their debts and work towards a more secure financial future.

What is an Individual Voluntary Arrangement (IVA)?

An Individual Voluntary Arrangement (IVA) is a legal agreement between an individual and their creditors, aiming to restructure and manage existing debts. This formal arrangement is supervised by a licensed Insolvency Practitioner, who acts as a mediator between the debtor and their creditors.

Key Features of an IVA:

1. Tailored Repayment Plan:

• IVAs involve creating a customised repayment plan based on the debtor's financial situation.
• The proposed plan typically spans a fixed period, often five to six years, during which the debtor makes affordable monthly payments.

2. Legal Protection:

• Once accepted, the IVA provides legal protection to the debtor against further legal actions from creditors, including court proceedings and wage garnishments.

3. Single Monthly Payment:

• Debtors make a single monthly payment to the Insolvency Practitioner, who then distributes the funds among the creditors in accordance with the agreed-upon terms.

4. Debt Write-off:

• At the end of the agreed term, any remaining unpaid debts covered by the IVA are typically written off, providing the debtor with a fresh financial start.

5. Creditors' Approval:

• To initiate an IVA, creditors representing at least 75% of the total debt must approve the proposal. This ensures that the majority of creditors are on board with the repayment plan.

Advantages of an IVA:

1. Avoiding Bankruptcy:

IVAs provide a viable alternative to bankruptcy, allowing debtors to manage their debts without the severe and long-term consequences associated with bankruptcy.

2. Reducing Monthly Payments:

Debtors benefit from reduced monthly payments, making it more feasible to meet financial obligations.

3. Legal Protection:

The legal protection offered by an IVA shields debtors from legal actions taken by creditors, providing peace of mind and stability during the repayment period.

4. Clear Path to Debt-Free Future:

Successful completion of an IVA results in a debt-free future, as any remaining covered debts are typically discharged at the end of the arrangement.

Individual Voluntary Arrangements play a crucial role in empowering individuals facing financial challenges to regain control of their lives. It provides a structured and legally binding framework for debt repayment, offering a lifeline to those burdened by unmanageable debts. As with any financial decision, seeking professional advice from a solicitor or qualified Insolvency Practitioner is essential to ensure that an IVA is the most suitable option based on individual circumstances.