How do I know whether an IVA is the best answer to my problems ?

There are no rules cast in stone, but suitable criteria as to whether an IVA would be best for you could be summarised as follows:

A minimum level of unsecured (i.e. not mortgage) debt of £20,000 owed to at least 3 creditors;

Ability to make consistent payments towards the IVA from your earnings of at least £300 per month for at most 5 years or until earlier full payment.  A lower level of monthly payments may be acceptable if a lump sum is also to go into the IVA from perhaps remortgaging your house;

A forecast eventual dividend to creditors of at least 25 pence in the pound after costs;

A committed desire to avoid bankruptcy.

The above criteria are important as IVAs are not cheap, and must be paid for out of money that would otherwise go to creditors.  At below £300 per month the costs of running the IVA would take up a substantial amount of the money coming in.  At below £20,000 total debt, again the costs of the IVA would be disproportionate to the level of debt involved.  For total debts below £20,000 a debt management plan is likely to be a more appropriate solution.

The commitment to avoid bankruptcy is important.  As creditors see an IVA as avoiding the stigma (and restrictions) of bankruptcy, they expect a better return from an IVA than from bankruptcy.  Consequently the usually accepted period for an IVA, which creditors are always likely to insist on, is 5 years, compared to only 3 years for which you might be liable to contribute if you were adjudged bankrupt instead.

An IVA should not be entered into lightly.  If you fail to maintain the payments half way through then the Supervisor may be obliged to petition for your bankruptcy, which would mean all that time and money had been wasted.  You should only propose an IVA if you are confident that you can adhere to it.

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IVA Questions and answers.

I have serious debt problems. What are the options ?

How do I know whether an Individual Voluntary Arrangement (IVA) is the best answer to my problems ?

How do I work out how much I can afford to pay per month ?

OK I'm considering an IVA . How does it work ?

Do I have to attend meetings, or can this all be done by correspondence ?

What do creditors expect from it and how likely is it they'll accept it ?

Are all of them forced to accept the majority decision ? I've got one hell bent on making me bankrupt.

What happens if they don't like the deal ?

If the IVA is rejected, do I owe you anything ?

I've buried my head in the sand, now I've got a bankruptcy petition hearing next week. Is there something that can be done at this late stage ?

Will it really write off all of my debts ?

Will I live in poverty for the duration of the IVA ?

What if I win the lottery or get a big pay rise ?

Will it appear in the newspapers ? Will people know about it ? Will I ever be able to get credit again ?

Is an IVA more expensive than just going bankrupt ?

What will happen to my house, furniture, car and domestic effects ?

I run a business. What will happen to my business ?

I'm a professionally qualified person. Will I lose my livelihood ?

My partner has no debts, and I'm living with him/her. Will he/she have to contribute to the IVA ?

My partner and I have joint debts. Can we lump them all together in the same IVA ?

How do you get paid ? What does this all cost ?

There are plenty of Insolvency Practitioners or debt advice companies around. Why should I instruct you ?

What happens if I'm unable to keep up with the payments ?

What happens at the end of the arrangement ?

What other web sites do you suggest I look at for bankruptcy/IVA advice ?

Please note that this site deals only with personal insolvency law in England, Wales and Northern Ireland. By law, only a Licensed Insolvency Practitioner can undertake an IVA for you. If you need an Insolvency Practitioner in Scotland, visit The Institute of Chartered Accountants of Scotland.

Copyright © Philip Beck Insolvency Practitioner, Cambridge UK, 2005. Bankruptcy and individual voluntary arrangements explained. Free IVA Advice. How to avoid bankruptcy with an Individual Voluntary Arrangement. Debt, debt advice, debt management, debt consolidation.

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