What is an IVA ?

An IVA is an Individual Voluntary Arrangement. These apply to individuals who are either in paid employment or self-employed where the individual finds him/herself unable to pay all that is owed out of income which becomes insufficient.

Voluntary Arrangements are also available for partnerships (PVA) and companies (CVA).

It is a way of formally holding off creditors who are giving pressure to an individual to pay outstanding debts by allowing time and negotiating a lesser amount.

Currently the rules are that 75% of the value of creditors must agree to the arrangement – but often, creditors faced with the option of getting some or all of their money over a future time period is preferable to getting nothing if the individual were forced into bankruptcy.

A supervisor is appointed and an agreed sum each week/month is paid to the supervisor who then pays in equal amounts each creditor.

This way, an individual can get valuable breathing space to earn going forward, pay current laibilities and comfortably discharge their liabilities to the now ring-fenced past debt.

There are many companies offering their services and their fees come from the amounts paid each week/month.

A cashflow is produced showing expected income and expenditure -assuming no past debts which should show surplus cash. This cash over say a 3 year period is totalled and divided into the total debt to arrive at the percentage offer to creditors.

Supposing an individual owed £30,000 in overdrafts and credit card debts etc and when the income and expenditure cashflows were produced showed a monthly surplus of £275 this would make £9,900 available to a supervisor to distribute to creditors. £9,900 against £30,000 would roughly equate 33p in the pound offer.

The arrangement is ratified by the County Court but any creditor who was not included in the original list would still be able to pursue for all of its’ debt. So it is vitally important to include ALL debts.

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