An Individual Voluntary Agreement (or IVA) is an agreement between a creditor and a debtor to help pay off the debts at a manageable and affordable way. An IVA is legally binding, meaning that if one of the parties do not comply with the IVA, the other is able to enforce the agreement. The benefits of the IVA is that the creditors are able to recover most of their debt, and the debtor is able to have part of the debt written off and the rest repaid in a manageable way.
Can an IVA be forced on creditors?
An IVA cannot be forces onto creditors. Once the IVA has been proposed the creditors will meet and decide whether or not to approve it. Creditors are likely to favour an IVA if you are honest about your situation and present your very best offer. However, it is entirely in the hands of the creditors to decide amongst themselves the best way forward.
For an IVA to be approved, creditors who hold at least 75% of the value of the debt must vote in favour of it. The creditors can also propose modifications to the IVA and state that they would agree to the IVA if these modifications are made. The debtor can agree to the modifications there and then, alternatively, the debtor is entitled to 14 days to think about the modifications.
Debts included and excluded from the IVA
Any debt can be included in the IVA, subject to the debts specifically excluded from IVA agreements. Joint debts can also be included in the IVA, however, the other person named on the debt will still have to make their payment contributions.
The debts excluded from the IVA are as follows:
- Mortgages and secured loans
- Hire purchase agreements
- Court fines
- TV license arrears
- Student loans
- Child support arrears
- Social funding loans
What happens to the debt once the IVA is in place?
An IVA agreement will either be paid in a lump sum on in monthly instalments for 60-72 months. Once all the payments under the IVA have been made to the creditors the outstanding balance of the debt will be written off. You will also receive a certificate of completion stating that you no longer have any debts remaining.