Considering Individual Voluntary Arrangements

For those in financially challenging circumstances, the options may feel limited and daunting. In reality, there are safety nets available enabling an examination of the possibilities.

Individual Voluntary Arrangement

IVA is a legal agreement that may reduce the amount owed on unsecured debts. Qualified professionals work with creditors who are owed loan repayments. They determine new incremental payment amounts as well as payment schedules.

New payment amounts are ascertained by assessing the ongoing cost of living for the debtor. Realistic monthly payments are then determined according to what can be accommodated by the level of monthly income. IVA terms usually extend for a 60-month period. Once this agreed-upon payment period is exhausted, any remaining debt is then written-off by the creditor. For more information on IVA’s see;

Impact of Using Insolvency Service

Among the commonly asked questions is the issue of credit rating impact. Like a bankruptcy, an IVA will leave a mark on the credit history. This is a logical outcome, since creditors are required to assume some debt that will never be repaid.

Also, it is worth noting that missed payments, or making payments past their due date, affects a credit history as well. So, by the time one makes a decision to pursue this course of action, there is a strong likelihood that the credit rating has already been diminished. Taking this route is tracked on the credit history for 6 years: 1 year beyond the completion of most repayment plans.


Once a repayment plan has legally been established, creditors are banned from taking any other negative actions. This is solely applicable if the terms of the repayment plan are followed.

While this program does only cover unsecured debt, like credit cards, it is not an additional loan. As a result, it may significantly reduce the total amount owed.

Although some creditors may attempt to refute this plan, only a majority of them are required to approve it in order to move the program forward. In other words, if  those holding ¾ of the outstanding balance agree to the IVA, all of the rest are bound by the terms as well.

Life circumstances are of little consequence to these proceedings. Essentially, as long as a petitioner has some income beyond their cost of living expenses, a plan can be created. That excess amount is not required to be substantial.

Possible Disadvantages

For those who own property, creditors can request that equity from that property be contributed to the repayment plan. This typically does not occur until the final two years of repayment, however each situation is unique.

In some cases, creditors may also continue to take action against those who default on their debt obligations, even after the IVA process has been initiated. On a positive note, if the process is underway, a debtor can ask the court system to ban any additional adverse actions and await the results of the Insolvency Service determination.

Once the process is underway, it cannot be halted. Fees are also associated with these professional services. Although the fees become a part of each payment, the practitioner will reveal the fee level prior to the commencement of the payment plan.


It typically takes approximately two months to establish a plan that is amenable to the creditors and formally instituted. Before making a commitment to a plan, the debtor can expect to be notified about the amount of the anticipated additional fees.

Legal practitioners are formally licensed. An assigned Insolvency Service Practitioner is assigned to each case and will follow it through with the debtor, the creditors, and the court system. Fees typically amount to eight weeks of disposable income, as assessed upon the initial intake. Although it is factored-in and becomes a part of the monthly repayment, the total amount is calculated separately from the creditor allocation.


Anyone who enters into an IVA is legally bound to continue the payment terms through its conclusion. Any default of compliance with the terms would be cause of termination of the protection provided. This means that lenders can resume any course of action for the full remaining amounts of money owed. This could force a bankruptcy.

In the event that personal circumstances undergo a dramatic alteration, an amendment to the plan can be petitioned. Still, there is no guarantee that a reconsideration will be entertained.

In some situations, IVA does not succeed with approval of the majority of involved lenders. If this should occur, request a list of alternatives.


For those who owe debts to banks which also host accounts that receive their paychecks, they may wish to consider opening an account at a different facility. In the event that overdraft allowances are provided at the host bank, that institution may draft the account for the highest possible amount. The only protection from this action is to deposit income at another bank.

Although IVA may not be the solution for everyone, it can provide hope and possibility to those who are encountering financial difficulties. This is an option that is worth considering carefully and completely.