Credit Crunch

What is an IVA and how can it help me?

An IVA or Individual Voluntary Arrangement is one of the steps you can take if you’re not able to keep up the repayments on your various credit agreements. It’s not bankruptcy, rather it’s a form of debt management and is usually handled on your behalf by a debt management company or insolvency practitioner as they like to call themselves!

An IVA is a solution for people who have debts totalling over £15,000. An IVA can bring down your repayments, freeze the interest, and stop your creditors from hassling you. In theory, you can be debt-free in sixty months.

Generally, the debtor (you) will pay an agreed sum upfront to the creditors (the people you owe money to) and the insolvency practitioner. This is then followed by a series of monthly payments based on what you can afford.

The repayments you’ll be asked to make will be calculated by doing an analysis of your income and expenditure. Once the amount you can pay is agreed, the repayment programme is then part of a legally binding contract. While your IVA is being arranged, you can apply to the court for what’s called an ‘interim order’ which prevents creditors from proceeding with a petition for bankruptcy while the order is in force.

However, the creditors can still force you into bankruptcy if you don’t meet whatever requirements they apply to the deal, or in other words, if you don’t keep your side of the bargain and miss payments once a repayment plan is in place.

There is one problem with IVA’s though and that is that it can only proceed if creditors representing more than 75% of the debt agree to the arrangement. So say for example you have loans with 3 companies, and only one of them agrees to enter into the IVA deal, it can’t go ahead. It would be unusual for this to happen however because most creditors realise that they’ve got a better chance of getting their money back through an IVA than they have if they simply hound you every month.

So, if you think this coud be for you, the first step to take is to find yourself a good, reputable insolvency practitioner. Given that we’re headed into a recession, there’s a lot of them about these days. You can check for companies that deal with IVA’s on the internet or you could consult your local Citizens Advice Bureau. Again, you can find the contact details for your local bureau on the internet.