Personal Insolvency

An IVA is a binding agreement between a person and their creditors. IVAs are very flexible. There are no restrictions on the level of debts or assets an individual can have when they enter into an IVA. IVAs can be used to agree lots of different things: a partial write-off of debt, for example, or a change in the length of time over which debts are repaid.

Am I eligible for an IVA?

To enter an IVA, you must be insolvent: you must be unable to pay a debt when it falls due, and you must be resident in England or Wales.

How do I enter an IVA?

To enter an IVA, you must put together a proposal for your creditors. An insolvency practitioner can help you do this, and they will give you advice about whether or not an IVA is the right solution for you. IVAs are overseen by a licensed insolvency practitioner.

You can propose any form of debt restructuring you like to your creditors. An IVA can be based on monthly payments, lump sum payments, the sale of one or more assets, third party payments, or a combination of any of these.

An IVA proposal is a formal legal document and can be lengthy and complex. Even though An Insolvency Practitioner will help you with your proposal, it remains your document and you could be prosecuted if it contains misleading information.

Details of your financial circumstances must be disclosed to creditors in the proposal and would include the following:

• Your assets
• Your income and expenditure
• Your household and living circumstances.
• How much creditors can expect to be paid
• Intended duration of your IVA

Once you have prepared your proposal, it is put to creditors for a vote. Your IVA will begin if your proposal is approved by creditors owed 75% or more of the value of your debts (out of those creditors voting on the proposal).

Your creditors can propose and vote on modifications to your proposal. You will need to agree to any such modifications if you want the IVA to go ahead but you are not obliged to agree.

Am I protected from creditors in an IVA?

Once you have entered an IVA, your creditors will not be able to take action against you in relation to debts that were owed prior to the start of the procedure.

How do I pay for an IVA?

There are no government fees in IVAs, but you will have to pay for the insolvency practitioner’s work. These fees are usually deducted from the money you pay into the IVA and will be included in the IVA proposal. In some circumstances, the Insolvency Practitioner may require you to pay a nominee fee up front.

What happens if I do not comply with my IVA?

If you do not keep up with the terms of your IVA, the IVA may fail and you will still be liable for the unpaid debts covered by the IVA. Subject to the terms of the IVA, you may be made bankrupt.

During an IVA you will still need to keep up with ongoing commitments, like rent, mortgage payments, or bills, including new credit card or utility bills.

Which of my debts and creditors will be affected?

With some exceptions, your IVA will affect the debts you owe to all your creditors – including those creditors which voted against the proposal.

Your secured creditors will not be affected by the IVA unless they agree to be bound by it. Once you have agreed an IVA, your creditors will not be able to take action against you in relation to any of the debts you owed when the procedure started.

As with all statutory solutions, there are some debts which cannot be written off by the procedure.

• Once the IVA ends, you will still owe the following:
• Any debts which are secured against an asset you own, such as a house or car
• Child maintenance
• Student loans
• Social Fund budgeting and crisis loans
• Fines for drug offences
• Court-ordered damages or fines
• TV licence debts
• Any debts incurred after the IVA started

If I own a home, what will happen to it?

As with the rest of your assets, you may retain ownership of your home if you enter an IVA.

However, you may still be required to sell or re-mortgage your property if this is part of the proposal agreed to by creditors.

What will happen to my assets and income?

During an IVA, you will retain control of your assets and income. You may choose to sell some of your assets to raise money to contribute to the IVA (this can be part of the IVA proposal).

Your creditors might also require you to sell some assets as a condition for their support of the IVA (this may be suggested as a modification to your proposal).

How long will an IVA last?

Your IVA will last as long as agreed to by your creditors. This can vary from case to case as there is no legally prescribed IVA length.

Typically, an IVA based on monthly contributions will last for five years.

Once the IVA has been successfully completed, you will be no longer be considered to owe the debts which were covered by the IVA.

Who else might I be affected?

If you are in an IVA, you will not be subject to the same restrictions as you would in a bankruptcy or Debt Relief Order. You would still be able to act as a company director, for example.

You will still need to tell organisations (such as a lender) that you are in an IVA if you are asked. You should also check any contracts to which you are a party to see if there are any clauses which relate to IVAs.

Your IVA will remain on your credit history for six years from the date it started. Once you have entered an IVA, your name will also be added to the government’s Individual Insolvency Register. This register is publicly available. Your name will be removed from the register three months after the end of your IVA.

Can an IVA be cancelled or extended?

The terms of an IVA can be changed if creditors agree – this includes lengthening or shortening the IVA. This is called a variation. Variations will need to be voted on by creditors.

An IVA can be cancelled if you do not comply with the terms of the agreement. If an IVA fails, you may end up back in the position you were at the beginning.

Your supervisor may also cancel the IVA if they discover you were dishonest about the information provided as part of your proposal.