How much debt will I have to pay back with an IVA?
The Individual Voluntary Arrangement (IVA) was designed to help debtors avoid bankruptcy, which can have serious, long-lasting consequences. As one of the more favourable debt solutions available to people who have encountered financial difficulty, the IVA can be availed of by any person who has debts worth £12,000 or more from at least two different creditors. The debtor should also be able to repay £150 or more every month.
Although less extreme than bankruptcy, the Individual Voluntary Arrangement should not be confused with a debt management plan, which is not subject to the same provisions of law. The Individual Voluntary Arrangement is a legally binding contract that aims to establish an agreement between the debtor and his creditors.
The arrangement usually involves the debtor being asked to agree a fixed monthly repayment, while the creditors are asked to accept a percentage of the total debt. Although the Individual Voluntary Arrangement appears to favour debtors, creditors do benefit from the agreement in so far as they are guaranteed to receive some money from the debtor. If a debtor is forced to petition for bankruptcy, creditors could very well end up with nothing.
The Individual Voluntary Arrangement is usually effective for a period of five years, enabling the debtor to make at least 60 regular payments to his creditors. How much money will be repaid under an Individual Voluntary Arrangement depends on the circumstances of the debtor in question, whose finances will be analysed to determine an affordable monthly repayment that has to be agreed by the Insolvency Practitioner and creditors (at the Creditors' Meeting).