APPLY FOR AN IVA | February 2024
Apply for an iva

February 2024

Apply For An IVA in February 2024

An Individual Voluntary Arrangement (IVA) is a specific debt solution that can help UK residents dealing with money worries and unaffordable debt that they can’t pay back in full. It could help you avoid bankruptcy. It is a legal agreement taken out between you and your creditors to repay your debts over an agreed period of time, usually five years.

Your IVA proposal will be put together by a licensed insolvency practitioner (IP) who will act as your nominee.

It’s a big step to apply for an Individual Voluntary Arrangement, and it’s crucial to ensure you understand all the consequences before making a decision. 

This article should serve as a sufficient overview of the procedure. However, if you’re still not sure whether or not an IVA is appropriate for you, it’s advisable to contact a professional for further assistance before committing to any one debt solution.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

How does an IVA work?

Essentially, an IVA works by freezing all interest and charges on your debts and setting up a new repayment plan based on what you can realistically afford. This means you’ll only ever have to pay back what you can afford and not a penny more, which can relieve a huge weight created by debt.

Your IP will put together your IVA proposal and work out a monthly budget with you, which will take into account your income and expenditure. From this, they’ll calculate how much you can afford to contribute towards your IVA each month.

This monthly payment will then be divided between your creditors (proportionally, according to how much you owe each of them) and paid to them on your behalf by the IP. As long as you stick to the terms of the IVA and make your monthly payment, you will emerge at the end of the agreed term debt-free.

You’ll only ever have to pay back what you can realistically afford each month, as opposed to your current monthly payments, which may not be sustainable in the long term. Your creditors are legally bound by the terms of the IVA and can’t take any further action against you for failure to repay debts, such as getting a court order against you or sending bailiffs to your home.

Am I eligible for an IVA?

To be eligible for Individual Voluntary Arrangements, you must:

  • Owe at least £5,000 to 2 or more creditors
  • Be unable to make your debt repayments in full within a reasonable period of time
  • Have a regular income

If you’re unsure whether or not you qualify, you can use the government’s insolvency service’s online tool to check or get in touch with an insolvency practitioner for free advice.

Is an IVA right for me?

Taking out an IVA is a big step, so you will want to ensure that it is the sensible choice for your personal situation.

  • You’re struggling to make monthly repayments on your total debt
  • You’re getting behind on payments
  • You’re worried about losing your home
  • Your creditors are pursuing legal action against you

Suppose you’re unsure whether taking out an IVA is the correct decision for your financial situation. In that case, you might wish to consult with a professional for debt help and tailored advice for your personal circumstances.

Check how an IVA will impact your life

If you enter an IVA, it will significantly impact your life beyond just your debts. You’ll need to be prepared for the following:

  • Your credit rating will be affected for six years
  • You may struggle to secure credit in the future
  • You may not be able to take out a mortgage during the term of your IVA
  • You may be required to sell some of your possessions

There are also various other things which might be impacted by taking out an IVA.

If your income increases or you gain belongings during an IVA

If you come into more money or possessions (known as ‘assets’) during your IVA, you may be required to sell them and use the money to pay off your debts.

apply for an iva online

This could include things like:

  • An inheritance
  • A pay rise at work
  • Winning the lottery

If your circumstances change or your IP can ask creditors to agree to an amended agreement, however, if they refuse to accept these terms, the IVA may fail. There may be additional fees due to the IP if your IVA fails, and they can take court action to get these back from you.

If you have lasting power of attorney

Lasting power of attorney is a specific legal role that gives you legal authority to make decisions for someone else. This means that you might technically have legal control over their home, finances and assets.

Your lasting power of attorney isn’t usually affected by an IVA.

"It's a big step to apply for an Individual Voluntary Arrangement, and it's crucial to ensure you understand all the consequences before making a decision."

Check how your possessions will be affected

Most of your belongings will not be impacted by having an IVA – for example, most items you use in your home. If you have valuable things, such as antiques or jewellery, you may want to sell them to help pay off your debt.

High value items like your home or car are deemed ‘assets’ and can be included in your IVA. If they are included, you will sell them and use the money to pay the creditors. However, you don’t need to have any particular assets to get an IVA.

Your insolvency practitioner will talk to discuss your assets with you and advise you on whether they should be included in the IVA. You must inform your insolvency counsellor of all of your possessions. If you don’t tell them about something, you risk being in violation of the law.

Any assets that you wish to keep, such as a car, must be excluded from the IVA. Suppose you don’t want to include an asset and the insolvency practitioner doesn’t think your creditors will agree to exclude it. In that case, your insolvency practitioner won’t send the proposal to your creditors.

applying for an IVA

If you have any joint ownership of items with someone else, they may be able to keep them. For example, if you own your home with your partner, they may be able to stay there and continue paying the mortgage.

Check how your pension could be affected

If you are receiving a State Pension, its value will be included when you work out how much you can afford to pay into an IVA.

Consider how your bank accounts and savings will be affected

If you have savings in a bank account, you usually have to include these in your IVA, either by paying your creditors a lump sum or using the money to contribute to monthly repayments.

Your bank or a financial firm connected to them can withdraw funds from your account to pay off the debt. It’s a good idea to transfer money into an account at a different institution before your IVA begins. This should be handled by your insolvency professional.

Check how your job might be affected

Getting an IVA usually will not affect your job.

However, if you work in a specific line of business, such as as a solicitor or an accountant, your IVA might be an issue. You might not be able to continue working in your profession while you have the IVA, or you may be required to follow specific guidelines.

If you are concerned about the impact of an IVA on your job, check the terms and conditions of your contract to see if it says anything about continuing to work when you have an IVA.

How do I apply for an IVA?

Once you’ve figured out if you’re eligible for an IVA and have decided it is the right decision for you, you’ll need to begin the application process, which can at first seem daunting. The following steps set out in simple terms the IVA application process.

online iva

Gather the information you’ll need to apply

In order to apply for an IVA, you’ll need to have some information to hand. This includes:

  • How much you owe
  • Who you owe money to – known as your creditors
  • Your income and expenditure – how much money you have coming in and going out each month, usually evidenced by bank statements
  • Your disposable income after necessary expenses and essential living costs, which can also be proved through bank statements

You might need help gathering this information. You can get free debt advice on debt management from organisations like StepChange Debt Charity or National Debtline.

It’s worth noting that it is a criminal offence to hide something from your insolvency practitioner which might affect your IVA. It’s also a criminal offence to give them false or misleading financial information deliberately.

Find an insolvency practitioner

Once you’ve decided that an IVA is right for you, you’ll need to find a licensed insolvency practitioner (IP) to act as your nominee. At your insolvency appointment, your IP will assess your financial situation and work out a monthly budget with you, taking into account your income and expenditure. From this, they’ll calculate how much you can afford to pay each month.

You can find an IP by searching the Insolvency register of practitioners, licenced by the insolvency practitioners association and bound by the insolvency code of ethics.

It’s a good idea to get quotes from a few different insolvency practitioners before you make a decision. This will help you compare the other services on offer and make sure you’re getting value for money.

It is also possible to use a debt management company to get an IVA set up: look for one that doesn’t charge extra fees on top of the insolvency practitioner’s fees.

Check how much it will cost

There are usually two types of fees associated with an IVA:

  • The insolvency practitioner’s fees – for example, upfront fees or an initial setup fee, as well as their ongoing supervision fee. These will be paid out of the money you repay to your creditors.
  • Other professional fees – for example, the cost of getting a valuation of your property or the cost of selling it. These will need to be paid in addition to the insolvency practitioner’s fees and will usually be paid out of the proceeds of the sale of any assets.

Make sure you understand all the upfront fees and long term fees involved before you make a decision about whether to go ahead with an IVA. You can find more information about insolvency practitioner fees on the Insolvency Service’s website.

Meet with your insolvency practitioner

Your IP will work with you to put together a proposal for your creditors outlining how much you can afford to repay and over what period of time.

Share your repayment plan with your creditors

The IP will send the IVA proposal to your creditors and arranges a formal meeting called a ‘creditors meeting’.

If your creditors are happy to agree to the terms of the IVA, they’ll vote on whether to accept it. If more than 75% of them agree, the IVA will be put in place.

If your IVA proposal is accepted

Once the IVA is in place, you’ll make regular payments to your IP, who will then distribute the money among your creditors – it is, in essence, a simple debt solution.

If you’re struggling to make the payments, or if your current circumstances change, you can contact your IP to discuss your options, and there will usually be an annual review of your IVA debt.

So long as you abide by the terms set out in the proposal, any remaining debt you still owe your creditors will be written off at the end of the fixed term, but an IVA will remain on your credit file for six years and could impact your credit score.

iva application

It’s important to remember that an IVA agreement is a legally binding agreement between you and all your creditors, so it’s essential to make sure you understand all the terms and conditions before you sign up. If you are unsure about anything it is vital that you ask your IP for clarification.

What if my IVA isn’t accepted?

Most creditors have signed up to an IVA protocol. The IVA protocol contains guidelines on how a proposal should be drawn up. Creditors are expected to accept a formal arrangement that has been drawn up under the protocol and not ask for unnecessary changes to it.

However, if your creditors refuse the IVA proposal put together by your insolvency practitioner, you might want to consider an alternative debt solution. If your creditors vote against your proposal, you still have the option of an informal arrangement or asking if they will accept amended terms. 

Other debt solutions available include a debt management plan or a debt relief order. You can get free expert advice on alternative solutions for your debt from organisations like StepChange Debt Charity or National Debtline to help you find the right solution for your debt circumstances.

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – [email protected]

Frequently Asked Questions

How does an IVA work?

Essentially, an IVA works by freezing all interest and charges on your debts and setting up a new repayment plan based on what you can realistically afford. This means you’ll only ever have to pay back what you can afford and not a penny more, which can relieve a huge weight created by debt.

Am I eligible for an IVA?

To be eligible for Individual Voluntary Arrangements, you must:

  • Owe at least £5,000 to 2 or more creditors
  • Be unable to make your debt repayments in full within a reasonable period of time
  • Have a regular income
How do I apply for an IVA?

Once you’ve figured out if you’re eligible for an IVA and have decided it is the right decision for you, you’ll need to begin the application process, which can at first seem daunting. The following steps set out in simple terms the IVA application process.

Share your repayment plan with your creditors

The IP will send the IVA proposal to your creditors and arranges a formal meeting called a ‘creditors meeting’.

If your creditors are happy to agree to the terms of the IVA, they’ll vote on whether to accept it. If more than 75% of them agree, the IVA will be put in place.

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Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.

Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.