Individual Voluntary Arrangement (IVA) Explained

An Individual Voluntary Arrangement is a formal repayment agreement between a debtor (person owing money) and their creditors (the people who are owed money).

An (IVA) is a legally binding agreement, and allows a debtor to make reduced monthly payments to their unsecured creditors in order to pay off a percentage of what they owe for the duration of the Individual Voluntary Arrangement (IVA), which is normally 5 years.

During the IVA, the creditors are legally bound to freeze the interest on any outstanding debts and to cease adding late payment charges to the debtor's account(s).

Also the creditors are forbidden from contacting the debtor with regard to the outstanding debts, whether by mail, telephone, fax or email, as any correspondence must be passed through the appointed Insolvency Practitioner's office under the terms of the Individual Voluntary Arrangement (IVA).

Once an IVA has been successfully completed any outstanding balances must be written off by the creditors, in many cases as much as 75%!, leaving the debtor debt free.

The size of the monthly repayments to the IVA are calculated with the help of the debtor providing the relevant documentation and are based on what the debtor can realistically afford throughout the term of the IVA.

To qualify for an IVA the following minimum requirements need to be met.

• Debts must be over £15,000
• 3 or more different named creditors
• Debtors must be in receipt of a regular income which is not wholly dependant on benefits