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IVA FAQs
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IVA - the basics
1) What exactly is an IVA?
2) What can an IVA do for me?
3) How do I know if an IVA is right for me?
4) Can an IVA help me repay off all my debts?
5) What would an IVA cost me?
IVA - the people involved
6) Who's involved in an IVA?
7) Do all my creditors have to agree to the IVA?
IVA - the process
8) How do I enter an IVA?
9) Would I lose my home?
10) What would happen if my situation changed in the middle of the IVA?
1) What exactly is an IVA?
An IVA is a legally binding agreement between you and your unsecured creditors.
It can allow you to pay off your debt at an affordable rate. Unlike bankruptcy, it's extremely unlikely to force you to sell your property - and it won't be publicised in the newspapers or impose restrictions on your career.
You would stop repaying your unsecured lenders directly. Instead, you'd make a series of (smaller) payments to the IVA, and your unsecured lenders would each get a portion of this.
2) What can an IVA do for me?
It can reduce your monthly repayments based on what you can afford and protect you from any legal action by your creditors.
If you and your unsecured creditors can (with our help) agree on the terms you'll make regular monthly payments for (in most cases) 5 years, and will have paid off the unsecured debt. You should note that it will affect credit rating for 6 years.
3) How do I know if an IVA is right for me?
IVAs are only suitable for people who:
- Owe two or more unsecured creditors a total of £15,000 or more, and
- Cannot make the monthly payments to those creditors, but
- Can commit to making regular - though smaller - payments for the duration of the IVA.
However, not everyone who can enter an IVA should do so. To find out if it's the best way for you to repay your debts, call the IVA Advisory Centre on 0800 970 5489 or fill in the call-back form on this page and we'll phone at a time that's convenient for you.
4) Can an IVA help me repay all my debts?
Upon successful completion, an IVA will write off the portion of the unsecured debt (credit cards, personal loans, store cards, overdrafts, etc.) included in your IVA that you haven't been able to repay. Any unsecured debts not included in your IVA will remain outstanding.
It can also help you stay on top of your other debts and bills: your payments to the IVA will be set at a level that leaves you with enough money for your essential expenses (mortgage/rent, secured loans, utility bills, food, petrol, clothes, etc.).
5) What would an IVA cost me?
It's different in each case. Tell us about your financial situation and we'll calculate how much you'd be able to pay every month. If we think your lenders would accept this, we'll draw up an IVA Proposal.
Your monthly payments would cover our fees and the payments to your creditors. We won't charge you any undisclosed fees or commission. Click here for more about our fees.
6) Who's involved in an IVA?
You, your unsecured creditors, the court and your Insolvency Practitioner (IP) - since an IVA is a form of insolvency, it can only be administered by a licensed IP.
Unlike bankruptcy, it won't be publicised in your local newspaper, although it will appear in the Insolvency Register, which is available to the public.
7) Do all my creditors have to agree to the IVA?
No. Your creditors will be invited to vote on your IVA proposal. It must be accepted by creditors who collectively own 75% of your unsecured debt (excluding any debt belonging to a creditor who doesn't vote either way).
If it's approved, all your creditors will be bound by the terms of the IVA - even creditors who rejected it or didn't vote.
Some creditors may request a few changes to your proposal before they'll accept it.
8) How do I enter an IVA?
Call the IVA Advisory Centre and speak to one of our advisers. Tell them about your financial situation and they'll help you explore your options. If it seems that an IVA is the best way for you to pay off your debts, they'll tell you exactly what would be involved, so you can decide if you want to go ahead with it.
If you do, you'll work with us to draw up an IVA proposal that tells your creditors what you could afford to pay every month without taking up the money you need for your essential expenses (rent/mortgage, utility bills, petrol, food, etc.).
If this proposal is accepted at the Creditors Meeting, the IVA can start. Your creditors may expect you to reduce your spending on non-essentials before they'll agree to the proposed terms.
If an IVA isn't right for you, we'll describe the other debt solutions that might be able to help you repay your debts.
9) Would I lose my home?
An IVA is unlikely to lead to the sale of your home, but it will affect your credit rating and you may find it difficult to obtain a mortgage or other credit - and/or you might end up paying a higher rate of interest if you do. You may be required to release some of the equity in your home halfway through the final year of the IVA. If you are unable to release equity, your IVA might be extended by up to 12 months.
As you are unlikely to lose your home, this is one reason homeowners with debt problems are particularly interested in IVAs, rather than bankruptcy, which would require them to release any equity worth over £1,000 and could force the sale of their property.
10) What would happen if my situation changed in the middle of the IVA?
Creditors understand that a lot can happen while the IVA is in progress, and that something could change, making it difficult (or impossible) for you to keep up with your payments. You could lose your job, for example, or your rent/mortgage/utility bills could rise more rapidly than expected.
If this meant you couldn't keep up with your payments, your IVA could fail, and you could even end up being made bankrupt.
IVAs are designed to offer some flexibility where there has been an unforeseen change in circumstances. If you run into difficulties in the middle of the IVA, your creditors may accept a few changes to the terms, rather than abandoning the IVA altogether. They may, for example, agree to accept lower payments for a longer period. As with the original IVA proposal, any 'IVA Variation' would have to be accepted by creditors accounting for 75% of the debt.
Similarly, if you receive a lump sum of money, they may accept a 'full and final settlement', bringing the IVA to a successful conclusion earlier than expected.
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