An Individual Voluntary Agreement (IVA) is a type of personal debt solution that is based on a formal and legally binding agreement between yourself and your creditors. This means you’re required to make single monthly payments to cover all of your debt as an alternative to bankruptcy.

Applying for an IVA can be a very overwhelming situation, so this handy guide serves as a simple manual to help take you through the process as easily and as hassle-free as possible. Keep reading for help and assistance with the application process.

How Does an IVA Work?

An IVA is formal agreement between your and your creditors, and it requires a licenced insolvency practitioner to set it up. An insolvency practitioner must be licenced by a professional body, such as the Insolvency Practitioners Association (“IPA”), or the Institute of Chartered Accountants in England & Wales (“ICAEW”), and will need to demonstrate that they have the relevant experience and knowledge to act as an insolvency practitioner. 

The insolvency practitioner will charge a fee for helping you to apply for IVA, and then supervise it once it is approved. In most cases, the fees will be taken from the payments you make, however, depending on the provider, you may be asked to make an upfront payment for the service, or in the event the IVA fails, the provider may ask you to pay any outstanding fees. At NDH Financial, we do not charge an upfront free, and we will not ask you to make any payments to us if the IVA fails.

Once you’ve decided to proceed with an IVA, you will work with your insolvency practitioner to come up with an IVA repayment plan. This will be based on your household income and expenditure, and should be an affordable and sustainable payment, for the duration of the IVA. When calculating your household income, the insolvency practitioner will need to know all of your sources of income, however, some income may be excluded, as it is discounted in bankruptcy or a Debt Relief Order (“DRO”) application.

Once your creditors approve the IVA, you will then make payments directly to the insolvency practitioner. The insolvency practitioner will deduct the fees from the payment, as per creditors’ instructions, and distribute the remaining funds to creditors. As the IVA progresses, the payment that is made to your creditors will increase, as the amount deducted for fees is usually higher in the first year or two of the IVA.

Provided that you follow the terms of the IVA, the agreement will act as a form of payment protection and will protect you from unsecured debt creditors and bailiffs. Any remaining debt at the end of your IVA will be written off, and the creditors or debt collectors will not be able to demand payment for the outstanding amount. 

If you’re considering applying for an IVA, NDH Financial offers a free consultation service to help you and a team of qualified IVA consultants decide whether an IVA is an appropriate solution for you. With the ability to write off up to 75% of your debts, an IVA relief scheme with no upfront costs is worth thinking about. 

If you fail to keep up with your payments, your IVA will fail, and in a very small minority of cases, can result in a bankruptcy petition being presented against you. This will have adverse effects on your credit score and overall credit file, meaning that filling out something like a mortgage application or a credit card application will be a lot more difficult and very unlikely to be granted. You could also have trouble with tenancy agreements if landlords look at your credit history or credit accounts through credit reference agency files and see you have an outstanding debt creditor. You can check your own credit rating through credit reference agencies. There are also agencies that specialise in bad credit mortgages. 

How Do I Qualify for an IVA?

The guidelines for qualifying for an IVA are exactly that – guidelines. Each case is individually assessed, but the baseline criteria for qualifying for an IVA is that you are insolvent. This means that either you have more debts than the combined value of your assets, or, you are unable to pay your creditors the contractual payments, as they fall due. This is the same criteria that is applied to bankruptcy, and therefore if this applies to you, your creditors would be free to present a bankruptcy petition against you.

While there is a possibility that your proposals may be rejected by your creditors, your insolvency practitioner will be the one who presents them to your creditors. Beforehand, they will help you to decide if an IVA is right for you, and they will give you their advice on whether or not they think the proposals have a reasonable prospect of being approved by your creditors. 

You will need to supply your insolvency practitioner with information about your financial status, including your assets, income, debt amount, credit card details, creditors, and whether you’re in the armed services. It’s important to remember that it’s not necessary for all of your creditors to agree to an IVA. As long as 75% or more agree to the arrangement, the IVA will be able to go forward and will include all of the unsecured creditors that existed at the time the IVA was approved. This means that any unsecured debt that was outstanding at the time the IVA is approved will still be included in the IVA, even if they were missed off the paperwork in error. It is important to make sure you tell the insolvency practitioner about all of your unsecured debts, because even though the debt will still be included in the IVA if it was missed off, there can be complications if the debt causes an increase in your creditors above 15%. Also, there are some unsecured debts that cannot be included, such as Student Loans, child maintenance arrears, or court fines.

Please note that in order to qualify for an IVA you must live in England, Wales or Northern Ireland. Although a similar solution - a Trust Deed - is available, IVAs themselves are not available in Scotland. 

How Do You Set Up an IVA?

In order to set up an IVA, you need to find a licenced insolvency practitioner. You can find an insolvency practitioner through trusted websites, such as the Insolvency Service’s Insolvency Practitioner directory or being referred by a third party company.

NDH Financial is a licensed insolvency practitioner that offers a simple way of setting up an IVA. Our initial assessment involves five questions: your estimated debt level, whether you’re behind on payments, your employment status, where you live, and your basic contact details so we can arrange a free IVA consultation with you. 

Once you have found a qualified insolvency practitioner, they will work with you to calculate an affordable payment plan to offer to your creditors. Depending on your circumstances, they may apply for an interim order through the courts to prevent creditors from taking action against you while you’re setting up the IVA, however, this does require you to pay the court application fee, before the IVA can proceed.

The insolvency practitioner will then prepare a proposal for you, based on the information you have provided and tell you whether there is a reasonable prospect the creditors will accept it. The proposal will state that you agree to pay your creditors X amount over a certain time period. As touched on above, if more than 75% of the creditors agree to the IVA, the proposal is approved, and all of the creditors are bound to the IVA by law, even if they didn’t agree or actively voted against it. 

Thinking About Applying For an IVA?

Apply now with NDH Financial to receive a free call from an IVA consultant. Your consultant will help you to identify how much you owe, how much you can reasonably afford to pay towards your debts, see if you qualify for the IVA, and confirm how much of your debt you could potentially write off. An IVA can help you to become debt-free while avoiding bankruptcy and further action by your creditors.