How Does an IVA Work?

An IVA is an agreement with your creditors which can help you repay your unsecured debts in affordable monthly payments, and even write off some of the debt. It usually ends most creditor contact. Here we discuss the question ‘how does an IVA work?’ in detail and explain how it can help you.

An Individual Voluntary Arrangement (IVA) is a formal, legally binding agreement between you and your creditors to repay what you can over a reasonable period. This is an extremely popular debt solution and is used by thousands of people every year. We have helped 15,377* customers already so far.

* As of 02/02/21 15,377 of our customers were in an active IVA.

How the IVA process works

  • The first step is to apply online – you tell us your circumstances and we will let you know whether you’re eligible and help you find out whether an IVA would work for you.
  • If you decide to proceed with an IVA, an Insolvency Practitioner will help you put together an IVA Proposal, which is presented to your creditors.
  • A meeting is held with your creditors who will choose whether the proposal is acceptable to them. Provided 75% or more of the value of your creditors who choose to vote, are in favour, your IVA will be approved.
  • Following approval, you then need to follow the terms and conditions of the IVA.
  • Should you have any change in circumstances during your IVA you will need to contact your Insolvency Practitioner who will be able to help.
  • Any unsecured debt that is left at the end of your IVA after completion, can be written off. You can then focus on the things that matter in life.

The IVA process always starts with debt. If finances are becoming difficult to control, multiple creditors are chasing you for money, and you don’t realistically see a way to pay what you owe, an IVA could be an ideal debt solution to regain control.

The good news is this situation is very common and, by dealing with it, you’re well on your way to getting back in the black.

Fortunately, starting the process is relatively straightforward – you’re in the right place already. Just click the button below and we’ll go through the rest of the IVA process with you:

Apply now

Is an IVA right for me?

If you’re wondering whether an IVA is right for you, it may be suitable in the following circumstances:

  • You want to write off some of your debts.
  • You want someone else to deal with creditors on your behalf.
  • You don’t realistically see a way to repay your debts in full over a reasonable timeframe.
  • You are happy for a debt solution to last at least five years.
  • You’re happy to make monthly repayments.

Setting up an IVA – How do you get started?

As an IVA is legally binding, it must be set up by a qualified licensed professional. This individual, called an Insolvency Practitioner, primarily works on your and your creditors' behalf to handle the IVA.

During the set-up process, you and the Insolvency Practitioner will work together to work out how much you owe and how long the IVA should last. The Insolvency Practitioner will also take down details such as any assets you might have, your income, and which lenders you owe money to.

During this time, it may be possible to apply for an interim order if you are faced with the threat of immediate bailiff / legal action. An interim order prevents your creditors from taking additional legal action while the IVA is being considered.

The Insolvency Practitioner should have a good idea as to whether an IVA is likely to work for you. If you choose to proceed with an IVA they will assist you with putting together an IVA proposal.

Do I qualify?

Setting up an IVA – Speaking to your creditors

Once you are happy with the IVA Proposal, you will be required to sign and return this. Upon receipt, the Insolvency Practitioner will send this to your creditors. For the IVA to become active, creditors who hold at least 75% of your debts, in value, must vote in favour to accept the proposal at a meeting held with them. Providing the IVA gives them a better return than bankruptcy, they should agree to the terms. It’s normally quite rare for lenders to refuse but – if they do – it’s not the end of the world. You could consider putting forward a revised offer to your creditors or possibly putting forward a new proposal, if appropriate. Alternatively, there are other solutions which you could consider.

Setting up an IVA – The day-to-day

Following approval, the IVA details from the meeting are distributed to your creditors. Interest and charges are frozen, your lenders shouldn’t directly contact you for payment, and you’ll be well on your way to dealing with your debts.

Now all you need to do is stick to the agreed monthly payments which have been calculated. Once the IVA completes, any remaining unsecured debt is written off.

Write off your debt

Interim orders explained

Earlier we mentioned interim orders. In the context of an IVA, this works to provide respite for those facing immediate recovery or bailiff action. Given an IVA takes several weeks to set up, lenders may still try to continue with legal action.

Although many creditors understand the IVA process and will grant a break while the agreement is being approved, some may still push for their money. In this case an interim order, which is a legal document obtained via a court which prevents enforcement measures continuing without the express permission of court.

Once the interim order is approved, it comes into effect immediately.

To find out if you could benefit from an interim order, speak with your Insolvency Practitioner. They will be able to advise.

IVA Insolvency Practitioners explained

An Insolvency Practitioner is a licenced professional authorised to act on behalf of the person requesting the IVA. They are qualified individuals and are strictly monitored by professional bodies, such as the ICAEW.

By choosing an IVA through us, you can be assured that you’re in safe hands.

What an IVA means for your credit rating

It’s worth noting that an IVA will have a detrimental effect on your credit rating. It will be recorded on your credit file for six years from the date the IVA is approved. However, if you have multiple debts to creditors which you’re struggling to repay, any missed payments are likely to have already been registered. Once the IVA has been completed, and your debts are a thing of the past, you can slowly start to re-build your credit score.