IVA and CVA faqs | Debt Advice

What is an IVA/CVA?

An IVA or Individual Voluntary Arrangement is a formal agreement between you (the debtor) and the people whom you owe money to (the creditor/s). The agreement entitles you to make reduced payments every month at an affordable rate, thus enabling you to pay off a percentage of your debts and have the rest written off. Because an IVA is a legal and formal debt solution, you must have your IVA set up by a Licensed Insolvency Practitioner.

What are the Benefits of an IVA?

There are many benefits and advantages to an IVA, detailed below:

One lower monthly debt repayment that is affordable for you
The stigma of Bankruptcy is avoided
Unlike Bankruptcy, an IVA is not reported in the local newspapers
An IVA is between you and your Creditors, so is confidential
You will be protected from your creditors
Your IVA is normally complete in 60 months or less
A percentage of your debts will be written off at the end of the IVA
Your property may be safeguarded, unlike in Bankruptcy
Interest and Charges are frozen
Once agreed, your creditors cannot change or get out of it; it is legally binding

Can anyone get an IVA?

Any insolvent individual who cannot pay their debts can apply for an IVA as long as your disposable income is over £200. However if your income is primarily made up of benefits it is unlikely that your IVA will be accepted.

What debts are covered by an IVA?

Any Unsecured Debts are included in an IVA. Unsecured Debts are loans, credit cards, trading debts like self assessment or tax, council tax, utilites, store cards, catalogues etc... Secured debts are not included in an IVA, but when determining your income and expenditure, these debts are given priority.

How long does an IVA last and how much will I have to pay?

An IVA usually lasts for 60 months (5 years). In some circumstances however, an IVA can be completed in a few months, but this would normally involve introducing a Lump Sum into the IVA, hence the name Lump Sum IVA.

Some IVA arrangements can last more than 5 years to introduce payments in lieu of a remortgage (if applicable to your case). In exceptional circumstances a small number of arrangements can last more than 6 years. The length of time your IVA will last will be determined in the IVA proposal, once all of your circumstances have been taken into account.

For more information on IVAs contact our Debt Advisors on Debt Advice. You can call our lo-call Debt Helpline on 0800 043 5133 or fill in the form above.

How much debt you have to pay off in your IVA depends really on your level of unsecured debt and your monthly income and outgoings each month. Every IVA query is treated and assessed individually. The best way to judge your payments is to know you will not be asked to pay anything more than what you can realistically afford each month.

We do not charge you for the setting up of an IVA. If your IVA is successful, the creditors determine our fee which is taken from your monthly payment to your creditors. You never receive a bill from us.
*Be wary. Some companies say they can do an IVA for you, then charge an unethical upfront fee, propose your IVA which may fail and you will be left with no IVA and no refund of your fee.

What happens on completion of an IVA?

When your IVA is finished, the remainder of your debt is legally written off and you will become DEBT FREE. You will be able to make a clean and fresh start to your finances and your life.

How do I set up an IVA?

Contact us at Debt Advice to discuss your situation. We will discuss your information and analyse whether an IVA is indeed the best course of action for you to take. We determine your suitability for an IVA by working out your income, expenditure and circumstances, taking into account your level of debt. We will also inform you of your other options.

If you want to proceed with an IVA with us, we will draft your proposal, put it to your creditors for voting. If more than 75% in value of your creditors agree to the IVA, your IVA becomes legally binding. As long as you stick to your monthly payments, your IVA will continue and after the specified time, you will be free from all the debts involved.

I am a homeowner. Will I have to sell my house?

You do not have to sell your home in an IVA. Your house is protected in an IVA as long as you maintain your mortgage and IVA payments. If you have equity in your home, you may need to release it in the fourth or final yr. This will be discussed during the set up period of your IVA. The amount released is generally only a percentage of the equity.

Will my creditors agree to an IVA?

Most Creditors are aware of an IVA as it has been in force since 1986. If the majority of creditors by amount of debt (75% to be exact) agree with your IVA then all of your creditors are then bound by its terms. Before voting, creditors can request certain changes to the IVA proposal and you can choose whether or not to accept them. If your creditors vote against your proposal you still have the option of an informal arrangement.

Does an IVA affect my credit rating?

When you enter into an IVA you must surrender all your forms of credit (i.e. store cards, credit cards etc) and you will not be allowed to obtain any further unsecured credit until you are finished your IVA. You are entitled to use pre-paid cards.

The bottom line is: If you are looking to enter into an IVA, it is highly likely your credit rating is not in a good way. By entering into an IVA, you will not have a bad credit rating forever and when you have completed your IVA, your credit rating will begin to repair.

nb. During an IVA, it is possible to take or change a mortgage but you will need to make sure you get the advice of your Insolvency Practitioner for this.

Other Debt Advice faqs

- Unsecured Debt faqs
- Secured Debt faqs
- Debt Management Plan faqs
- Administration Order faqs
- Trust Deed faqs
- Bankruptcy faqs
- Sequestration faqs
- Other/General Debt faqs

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