I am considering an IVA. How does it work?

Explanation of IVAs work

We receive a lot of calls and emails from the public asking; "I am considering an IVA. How does it work?".

How does an IVA work?

An Individual Voluntary Arrangement is often a preferable alternative to bankruptcy from both your point of view and that of the creditors. In practice most creditors try not to resort to bankruptcy petitions. This is because the fees associated with bankruptcy are high and, unless there are significant assets to be realised within the bankruptcy, there is often little left for the creditors.

How does an IVA work in process?

In every case, the first step is to assess whether an Individual Voluntary Arrangement is the most suitable arrangement for you. If we feel that it is not or you decide that it is not what you want to do, we will always suggest an alternative.

Once we have established that an IVA is appropriate, we will work together with you to determine how much you can realistically afford to pay into an arrangement. To do this we will need to ask you a number of questions about your financial situation. We will then discuss the figures with you and agree on a monthly repayment to your creditors. Other aspects of your financial situation will also be discussed such as the value of your assets. We will also need to ensure that all your creditors (lenders) are included within the arrangement.

When your proposals are drawn up and you are happy with them, you will need to sign them and get them witnessed by a solicitor or a commissioner for oaths. We will then make an application to court for an Interim Order. When this is in place your creditors cannot take any action against you and we can hold a meeting so that your creditors can consider your proposals. If enough of your creditors (75% in value of those creditors who vote) agree to your proposals the arrangement will become legally binding on them. All you then have to do is make the agreed payments. Once you have fulfilled the terms of your arrangement you will be free from your debts, even if you have only repaid a fraction of what is owed.

During the arrangement we will conduct regular reviews of your monthly payment. If during the period of your arrangement you find that you cannot meet the agreed payments we can ask your creditors if they will agree to vary the terms of your proposals. We want your arrangement to succeed and will do everything we can to help you through it.

How does an IVA work in terms of paying for the service?

Please note that for consumers considering an Individual Voluntary Arrangement (IVA); that the licensed insolvency practitioner’s clients are referred or forwarded to by Money Advice Direct for an IVA to process, charge a nominee, supervisor and initial administration fee. This fee structure covers the payments consumers make as well as the Licensed Insolvency Practitioner's fee for preparing, nominating and supervising the IVA. At the outset of the contract or service for an IVA the nominee fee is combined with the supervisory

Please note that there is also an initial administration fee. Please note that if the IVA fails then the client will be entitled to a refund of the initial administration fee. This IVA fee structure ultimately means there are no extra fees requested apart from the initial administration fee, nominee’s fee and supervisor’s fee.

Please beware of other commercial debt advice providers being unclear on their charges. Please note that if a fee is payable at any stage (including nominee/upfront and supervisory/administration fees) this information should be stated prominently in the advertisement, on any website and in any promotional material. Please note that were consumers are referred for debt management plans these services attract a fee. Finally, please note that your home may be repossessed if you do not keep up with repayments on a mortgage or secured loan.

The IVA fees charged by the insolvency practitioner are illustrated clearly in the IVA proposal and are based on; the amount of unsecured debt owed and the amount that is repaid into the IVA The following is breakdown of typical payments and fees on an IVA for someone owing £30,000 in unsecured debts and paying £300 per month into an IVA; Initial administration fee: £300, Nominees Fee: £1,275, Supervisors Fee:(over 60 months): £45 per month, Expenses: £290 and IVA failure fees: If an IVA fails then the debtor has to pay back the rest of the debts and any IVA costs outstanding.

If you are considering an IVA and want to know how does it work and understand how it can help you please complete the following form or telephone freephone 0800 074 6918.

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IVA's

The IVA Guide
Money Advice Direct has put together an IVA Guide based on the enquiries and questions that we receive at our helpline offices.

In the guide we cover such subjects as IVA Approval, early settlment of your IVA, missed IVA payments, IVA failure, additional debt claims and much more.
[click here for IVA Guide]

What is an IVA?
The IVA is an extremely powerful tool enabling you to clear your debt and return to a clean financial bill of health. Visit Money Advice Direct's Guide to Individual Voluntary Arrangements (IVAs).
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I am considering an IVA. How does it work?

Explanation of IVAs work

How does an IVA work?

How does an IVA work in process?

How does an IVA work in terms of paying for the service?

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