IVA UK How does it work?

IVA repayment amount

Once it has been decided that an Individual Voluntary Arrangement is the correct debt solution for you. You will then be asked several questions relating to your financial situation. The answers to these IVA related questions will help determine the repayment amount.

If you want to proceed with an IVA and there are legal actions commenced against you it will be necessary to apply for an Interim Order to halt legal action. This order prevents creditors from continuing or commencing legal action against you without leave of the court. A creditor meeting is then convened to give your creditors an opportunity to consider your proposal and vote “for” or “against” the Individual Voluntary Arrangement.

Voting to approve the IVA

UK IVA’s have to be approved by the creditors. This is done by a voting system. So for example, if only one creditor votes and they motion “for” an Individual Voluntary Arrangement the IVA will go through. However, if they vote “against” the IVA gets rejected.

In practice if the creditor is less than 25% your insolvency practitioner may canvass the views of your other creditors to ascertain if majority of your creditors will vote “for” to get the IVA approved, if they strongly feel the IVA is the right course of action.

In addition to this if the “against” IVA creditor represents more than 25% of your debt the Individual Voluntary Arrangement will fail to be arranged. The reason for this is a UK IVA will only ever be agreed if more than 75% of the creditors’ total debt vote “for” the IVA.

UK IVA - legally binding

When a UK IVA is agreed it is legally binding. This means that as long as you abide by the repayment terms over the agreed period you will be free from debt. Any debt remaining at the end of your IVA will be written off.

The repayment is normally one single affordable monthly payment over 60 months. If you are a homeowner and you have equity in your property you may be expected to bring a portion of your equity by way of re-mortgage. However if you are unable to re-mortgage then you will have to make another 12 months of repayments. Over the IVA period your financial situation will be reviewed. It is important to note that IVA’s are different from debt management plans which are not legally binding.

Debtsolve are licensed Insolvency Practitioners who arrange the IVA and manage and monitor the Individual Voluntary Arrangement from start to finish. If you would like to know more information about how UK IVA’s work please call us on 0161 763 2670 or fill out the form and one of our friendly advisors will get back a time convenient for you.