The IVA Process

An Individual Voluntary Arrangement (or IVA) is a debt solution for UK citizens that face unmanageable levels of debt. The process is legally binding and will require the debtor to pay back as much as they can afford over a predetermined period. This period is usually 5 years. At that time, the creditor will write off the rest of the debt.

One thing to take note of with an IVA is that your credit rating may be affected because it shows you have not been able to pay back your debts. It also means you will be on a fairly strict budget during the term of the IVA. For many people it's worth it because it allows them to avoid bankruptcy.

The IVA starts when you meet (in person or over the phone) with an Insolvency Practitioner. The IP is an experienced professional debt adviser and they will help you decide if any IVA is even right for you. Depending on your current finances, the IP will suggest any of a number of other debt solutions. IPs have years of experience dealing with debt so they should be able to point you in the right direction.

The next step in the process is to draft a proposal to your creditors. Don't worry, you wont have to do this but you may be asked a series of questions by your IP. After these questions have been answered then your IP can put together the proposal. Your IP will have to determine the length of the process as well as the amount you can afford to pay back each month.

At this point, the IP will give this proposal to your creditors to consider the terms and then vote on. Seventy-five percent of the lenders must approve the terms in order for them to go ahead.

The next step in the process is the creditors meeting. The creditors meetings don't take place in person anymore - instead your IP will make themselves available to the creditors to discuss any changes that they might want to make to the terms of the proposal. Often there will be some changes at this stage to allow for the interests of the creditor.

When the creditors meeting is complete your IVA will officially start and all of your debt will be frozen for the length of the IVA. During this period you will be required to stay with your budget for the entire arrangement.

When the IVA is set up, all lenders will be then bound by the terms in that arrangement and cannot decide to take any action against you. The only time they can do that is if you stop paying your monthly fees.

If you clearly follow the terms of the IVA then at the end of that period you will be legally debt free. It usually takes 6 years from the start of your IVA to have it removed from your credit history. That means that usually it is gone within a year of the end of your arrangement.

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