How does an IVA Work?

An IVA is a legally binding agreement designed to help you get on top of your debts. However, there’s a fair bit which goes into approving one of these solutions. After all, there are meetings, arrangements with creditors, and then the monthly payments.

The good news is the whole IVA process – from set up to approval – can be completed in less than six weeks. Moreover, we’ll do most of the complicated stuff during this time.

This is how an IVA works:

How does an IVA get started?

An IVA is a legally binding debt solution which gives it several advantages over other alternatives. You can read all about these on our IVA pros and cons page. However, this does mean it has to be set up by a qualified professional called an ‘insolvency practitioner’.

Finding one of these individuals couldn’t be easier, just click the button below:

During the application process, the insolvency practitioner will work with you to determine such matters as how much you owe and what you can afford to repay each month. Once this is done, they’ll be able to recommend if an IVA is the best debt solution for you.

If so, an IVA proposal will be created.

Taking the IVA proposal to your creditors

Working with the insolvency practitioner, you’ll help create an IVA proposal. Setting out a clear case for the IVA, this is then presented to your creditors during a ‘meeting’. Providing the organisations who hold at least 75% of your total debt agree to the terms, the IVA is approved.

Generally, as long as the IVA gives your lenders a better return from them than bankruptcy, they should agree to the terms. If not though, you and the insolvency practitioner will usually be allowed to make amendments to the proposal and try again.

How does a creditor meeting work?

Although the phrase ‘creditor meeting’ conjures images of people sitting together in the same room, in practice this doesn’t generally happen. The date of the meeting is just a deadline for votes on the IVA proposal.

If there is a meeting at all, it will usually be carried out online or over the phone. You also shouldn’t need to attend but just be contactable on the day to confirm the outcome of voting.

How does an IVA work on a daily basis?

If your creditors agree to the IVA, then interest and charges are frozen on your debts, direct contact with these firms should cease, and you can now start bringing your finances under control.

After working closely with the insolvency practitioner, you should know exactly how much you’ll need to repay on the agreement each month. You’ll usually need to make these payments until the IVA ends – typically this will be in about five to six years.

Once that happens though, any remaining debts will be written off.

As the IVA is legally binding, it’s important these payments occur. Although the agreement is not entirely inflexible and can sometimes be adjusted for changing circumstances, you may need to budget for the next few years to ensure IVA payments keep happening.

Fortunately, the amount you’ll have to pay per month shouldn’t be excessive as you and the insolvency practitioner will help determine what you can afford to make.

Is an IVA right for me?

By this point, an IVA probably sounds like a good idea. To determine if this is right for you though, you should ideally fulfil the following criteria:

  • Realistically, you’re unable to repay what you owe.
  • You want to write off your debts.
  • You want someone else to deal with your creditors.
  • You’re happy with this solution lasting at least five years.
  • You can make some repayment towards your lenders.

If this sounds like the best solution to your debts, click on the button below. We’ll help get your IVA application underway: