Client Information on an Individual Voluntary Arrangement

For Scottish clients the equivalent is a Trust Deed. Click here

IVA is the short name for an Individual Voluntary Arrangement, it is a formally agreed contract with your creditors that you will pay a fixed amount each month subject to them accepting reduced payments and a reduced amount over the term. It is normal that £15,000 or more debt across at least three creditors is required to qualify for an IVA, however, please take note of the ‘I’ in IVA, each IVA is assessed based on the individual, there is no fixed formula for the working of an IVA.

An IVA has benefits over and above the less formal Debt Management Plan (DMP) in that there is a definite fixed term, usually 5 years sometimes 6 years from commencement. After this point, your creditors will have already agreed to write off any outstanding unsecured debt. You may, however, be required to release equity in your property by way of a remortgage in the fourth year.

How an Individual Voluntary Arrangement (IVA) works

Step 1 – your first call to us on 01902 585052

When you contact us, we will initially assess your circumstances using our Best Advice Calculator and discuss the various options available to you. If your requirements are for an IVA we will then forward your information to one or partners who will then discuss this with you in more details. If this is not the solution for you, we will consider you for one of the other options we have available.

Step 2 – IVA proposal

If you appear to meet the criteria for an IVA, your case will be passed on to one of our IVA partners. They will contact you in order to get further information and make a decision as to whether you can proceed with an IVA application.

Step 3 – meeting of creditors (MOC)

Once your proposal has been drafted and sent to your creditors, we will arrange a by proxy meeting. This is in order that your creditors can vote on whether to accept your IVA proposal.

You would not normally attend this meeting as all votes are usually cast “by proxy” which is similar to a postal vote. You may attend if you wish.

Step 4 – your IVA has been approved

In around 75% of cases, your IVA will be approved, at which time your case will be passed to our supervision department, you will be appointed a case handler who will be there as a point of contact throughout your IVA. If one of your credits holds 75% of your debt (by value) they must agree for your IVA to be approved.

Benefits of an Individual Voluntary Arrangement (IVA)

An IVA will:

Consolidate all your debts
Reduce your monthly outgoings in line with what you can afford
Give you a date on which your debt will be cleared
Freeze your interest and charges
Stop debt collectors and bailiffs form calling you
Stop letters and phone calls from your creditors

Potential drawbacks of an Individual Voluntary Arrangement (IVA)

An IVA, like all other financial solutions has potential drawbacks. None are definite, but we feel it appropriate to outline them so that you can make an informed decision.

Your details will be recorded on the insolvency register
You will not be able to get any additional credit
Restrictions may be imposed on your expenditure
Your credit file may be affected
You will be tied into the agreement for 5, possibly 6 years
Homeowners may be required to release equity from their home in the fourth year through a loan or remortgage
Failure to comply with the IVA may lead to bankruptcy
Creditors holding 75% of the debt must agree to the IVA

Is my Payment Plan likely to affect my credit rating or result in defaults?

This will depend on the state of your credit at the start if you are currently missing payments you may have already damaged your credit profile. Most people who enter debt management, IVA’s Trust Deeds, full and final settlements etc, either have already severely damaged their credit profile or will do so anyway due to not having the ability to continue making the full payments to their creditors.

If you take out one of these products/solutions it is likely that your credit file will be adversely affected, especially if your credit profile is good at the start of the plan. Whilst we negotiate with lenders to stop action, lenders may still continue collections action including default notices and litigation and there is no guarantee that any threatened proceedings or actions will be withdrawn or lenders associated costs cease to be added.

Any adverse credit on your credit file could affect your ability to borrow and the choice of lenders available to you. In particular you may have difficulty borrowing in the short term and there may be a longer term impact depending on how your credit file is. IVAs, Trust Deeds and Bankruptcy will have a more severe impact on your credit profile and failure to maintain an IVA or a Trust Deed could lead to Bankruptcy. If you are already in arrears on your credit, the impact on your credit report will be less severe. If your credit profile is good you should also explore getting a loan if this might help you to reduce the cost of your borrowings. Our associated company Promise Solutions are experts in arranging loans for people who struggle to obtain loans through conventional sources. Please ask if you require further information.

Please remember the importance of maintaining payments on important debts such as your mortgage, rent and utility payments

Do not ignore correspondence or contact from your creditors or their agents unless someone is dealing with this for you, in which case pass on any information quickly

IVA Fees

Fees incurred for Individual Voluntary Arrangements are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors. Fees are made up of Nominees fees relating to assistance given to prepare your proposal and Supervisor fees which relate to the ongoing monitoring of your IVA. Promise do not charge any fees relating to an IVA as each IVA is prepared by a specialist partner which will explain all of the costs to you at the outset. They may also pay a referral fee to Promise for the preparatory work we have done on your behalf. There are no costs for you to pay up front as any fees are already included as part of your monthly contribution. The level of fees and the method of payment are both agreed by your creditors at the outset of the arrangement.

Nominees Fees

This is a fixed fee that will cover the work that goes into setting up your IVA:

Creating your IVA proposal. This is the document which must be approved by enough of your creditors for your IVA to start. It defines the proposed terms of the IVA: how much you would pay, what each creditor would receive, etc.
Setting up the creditors meeting. This is when your creditors will formally approve your IVA proposal, reject it, or request changes to it.
Assessing any suggested changes. If any creditors have requested changes to your IVA proposal, your IP will advise you on whether you should accept those changes - or consider a different approach to your debt problems.

Supervisors Fees

The supervisors fees will cover the ongoing supervision and maintenance of your IVA all the way through - so for five years, with a typical IVA. That means:

Your Relationship Manager will deal with any day-to-day issues that arise, ensuring your IVA runs smoothly
Your IP will carry out regular reviews of your IVA and address any more serious issues that come up - if, for instance, your financial situation worsens, and you need your IP to arrange an IVA variation (a legally binding change to the terms of your IVA, designed to help you bring the IVA to a successful conclusion).

After the nominees fee has been paid, a percentage of each monthly payment will be taken as supervisors fees, as detailed in your IVA proposal.

Note: Keeping up with your monthly payments in an IVA is vital - if you fail to, your IVA may fail, leaving you liable for the remaining balance and any costs already incurred. Having said that, IVAs do provide an element of flexibility: you may, for example, be allowed to take a small break from your payments if you come up against unexpected costs (such as essential home repairs).

Our IVAs are provided by one of a number of specialist partner company’s dependant on your circumstances They will confirm the exact fees from the outset.