An alternative to Bankruptcy and a DRO is an Individual Voluntary Arrangement (IVA), and is typically a contract between the debtor (you) and your creditors. An IVA binds all creditors who were entitled to vote in the arrangement and includes those crediors that voted against it.

The debtor will need 75% by value of the creditors to agree to the IVA to prevent a formal bankruptcy proceeding.

An IVA though can be expensive as it it set up by an Insolvency Practitioner, albeit the fees can be included in any monthly repayment.

A Court can also advise an IVA route during bankruptcy proceedings.

There were almost 78000 IVAs agreed in 2019 so they are an extremely popular Insolvency mechanism.

Any number of your creditors can be part of an IVA and may include:

  • Credit cards
  • Gas and electric arrears
  • Council tax arrears
  • Payday loans
  • Water rates arrears
  • Store cards
  • Tax credit or benefit overpayments
  • Overdrafts
  • Catalogues

However secured debts against your home can only be included within the IVA with the agreement of the creditor. As they could repossess your home in any event usually this consent is not fortcoming.

Creditors you cannot include:

  • Maintenance arrears agreed by a Court
  • Child support arrears 
  • Strudent loans
  • Magistrates Court fines
  • TV licence arrears

Advantages of an IVA

You only pay back what you can afford – creditors usually take a ‘haircut’ on what they are owed and are paid so much in the £

Your IVA will last for a fixed period of time – usually less than five years

Creditors lose the right to charge interest on your debts once an IVA is agreed

Unlike a bankruptcy, an IVA is not formally announced in the press and your PAYE code is not impacted ensuring your employer is not made aware of your financial circumstances

An IVA is a legal alternative to professions that forbid an individual going bankrupt – these include for instance accountants, bank officers, lawyers and even prison officers! You can therefore also continue as a company director under an IVA

An IVA can also protect the equity in your home by preventing creditors from selling it in order to repay them.

You can get on with your life with an IVA in the background and your creditors under control, putting to an end those threatening phone calls.

Negative aspect of an IVA

Your name and details of the IVA are still publicy listed on the Insolvency Register

There are restrictions on you incurring liabilities without consent of the IVA supervisor

You will only be able to operate a basic bank account

As you would expect an IVA will still have an impact on your credit rating but this would have happened anyway if you owed money. The problem of an IVA is that it can last longer that a Debt Relief Order and a Bankruptcy and therefore can impact on your credit score for longer.

It is recommended whatever Insolvency route you are contemplating that professional advice is taken.

Further information on IVA can be obtained from IVAorg CIC – telephone 0800 8568569. This company is a social enterprise (not for profit) and a Member of the Insolvency Practitioners Association. Citizens Advice is also another reputable organisation to contact on 0800 1448848.

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