An Individual Voluntary Arrangement (IVA) is a binding agreement between an individual and their creditors (the people or organisations to whom the individual owes money), typically based on the individual agreeing to repay a portion of their debts over a set period of time. It is one of the statutory insolvency procedures designed to help people resolve serious indebtedness.
An IVA is extremely flexible, and the form which an IVA takes will depend on the terms of the proposal agreed by the creditors. They can involve regular contributions from income and/or selling assets to make payments to creditors. As part of an IVA, interest charges are frozen, and creditors are prevented from taking action to retrieve what they’re owed outside of the IVA process.
IVAs are the most common form of personal insolvency procedure. In 2017, 71,034 people entered an IVA, out of a total of 115,319 new personal insolvency procedures. By the end of 2018, approximately 260,000 people were in an IVA. Between 1990 and the end of 2017, almost 300,000 people successfully completed an IVA.
IVA numbers have increased rapidly in recent years, rising 36% in the five years from 2014. By contrast, bankruptcy numbers fell 32% in the same period, while Debt Relief Order numbers rose by less than 1%.
All IVAs are overseen by a licensed insolvency practitioner acting as a ‘supervisor’. The insolvency practitioner will oversee the IVA process but is also available for support and guidance for the duration of the IVA.
Unlike bankruptcy, an individual will retain control of their assets in an IVA. People in an IVA are not subject to the same restrictions as people in bankruptcy, either: people in an IVA can continue to act as a company director, for example.
Your circumstance may change during the agreed IVA period. This could be a promotion, job loss, inheritance or any other factor which will impact your income. You should speak with your insolvency practitioner as soon as possible about the change in circumstances as they will be able to properly advise the best course of action. It might be that a revised proposal is prepared and sent to creditors, or an alternative procedure may be more appropriate. The insolvency practitioner will support you and guide you through the process.
Before an IVA starts, an individual must put together a proposal for repaying their debts (or some of their debts) to their creditors. A licensed insolvency practitioner, acting as an IVA ‘nominee’ can help with this process.
Once finalised, the proposal is put to creditors, who will then vote on it. IVAs need to be approved by creditors representing over 75% of the value of the debts owed to those unsecured, unconnected (i.e. not a family member) creditors voting.
Once approved, the IVA will cover all of an individual’s unsecured creditors, including those who voted against the proposal. Unsecured debts can include things like credit card debts or tax debts. An IVA won’t affect ‘secured’ debts (such as a mortgage) without the consent of the secured creditor. Without the secured creditor’s agreement, these debts will have to be paid as they were before the IVA.
A licensed insolvency practitioner will oversee an IVA, acting as a ‘supervisor’. They will make sure that both the individual and their creditors are abiding by the terms of the IVA. If an individual does not keep up with the terms of their IVA, the IVA may be terminated – and the individual will become liable for their debts again.
An IVA can last for any length of time, but five years is most common. Once an IVA is complete, the individual is released from the debts they owed before the IVA began, with any unpaid balance written off. IVAs will remain on someone’s credit history for six years, while details will be included on the Individual Insolvency Register for the duration of the IVA. Details will be removed from the register three months after the IVA ends.