Individual Voluntary Arrangement (IVA)

An Individual Voluntary Arrangement (IVA) is a lifeline for individuals in the UK grappling with unaffordable debt.

This legally binding-agreement offers a structured path to financial recovery by consolidating debts into manageable payments. 

In this guide, we explore IVAs, including the criteria you need to meet to enter into one, how to apply for an IVA, and the alternative debt solutions that can provide financial relief for those seeking to regain control of their finances.

What is an Individual Voluntary Arrangement?

An Individual Voluntary Arrangement (IVA) is a legally-binding debt solution available in the United Kingdom.

It’s a formal agreement between an individual and their creditors, allowing the debtor to repay their unsecured debts through manageable, structured payments. 

IVAs provide a structured way for people with unaffordable debt to regain control of their finances while avoiding the need for bankruptcy. 

This arrangement typically lasts for five to six years, during which the debtor makes regular payments, and any remaining debts are typically written off upon successful completion of the IVA.

Will an IVA work for me?

An IVA can be a positive way to manage your debts.

If you do qualify for an IVA you can stop pressure from the people you owe money to, reduce monthly payments, and possibly write off a percentage of your unaffordable unsecured debt.

IVA pros & cons

IVA Pros

✅ IVAs can be used to write off significant amounts of debt

✅ The monthly payments are affordable

✅ You are protected from legal action

✅ Your creditors can’t contact you directly

IVA Cons

❌ An IVA will impact your credit score

❌ Creditors are under no obligation to agree to an IVA request

❌ Only unsecured debts are included.

❌ IVAs are recorded on a public register

How to apply for an IVA

If you want to apply for an IVA or find out what other solutions could be available, get in touch and one of our friendly advisors will:

1. Review your current debts and financial situation, then give you all the information to make the right choice for you.
2. If you decide an IVA is the best option for you, Mums with Debt will help you with the setup process.
3. Once set up, we will review your application and send the IVA request to your creditors.
   

What debts does an IVA cover?

An IVA covers most unsecured debts, which means debts that are not tied to assets (usually your home). These can include:

• Household bills
• Council tax
• Credit cards
• Personal loans
• Overdrafts
• Payday loans
• Buy now, pay later debts

What debts can’t be included in an IVA?

An IVA typically includes most unsecured debts. Any debts that are tied to assets, like your house, will not be covered in an IVA.

• Mortgages
• Debts incurred through fines
• Student loans
• Court fines
• Social fund fines
• Hire purchase agreements
• Child support arrears

The day-to-day with an IVA:

As an IVA is often a long-standing agreement, over multiple years, it’s important to understand how living with an IVA will affect you. Your creditors will expect you to keep your expenses to reasonable levels ensuring you pay back as much as you can towards your debts.

How an IVA affects your finances:

In an IVA, your monthly debt repayments will be vastly reduced. This will, hopefully, free up more of your monthly income and allow you some financial respite from your current debts.

How an IVA affects your job:

In most instances, having an IVA won’t affect your current employment. Though it’s always good to read over your contract before going forward.

How an IVA affects your home:

Your home will be considered when applying for your IVA. Under the arrangement, it’s unlikely you will be made to sell your home. However, the IP will review any equity in your home, and you’ll probably be required to remortgage and release any available equity.