How does the IVA process work?

An Individual Voluntary Arrangement (IVA) is a legal debt solution that enables you to repay your unsecured debts through monthly instalments or a one-time lump sum payment. Typically, lasting five years, an IVA often results in repaying less than the total debt owed.

Unlike other debt management options handled by debt management companies, IVAs can only be established and overseen by Insolvency Practitioners (IPs). These professionals offer expert advice on debt and evaluate your financial situation to determine an affordable monthly payment, which influences the duration of your arrangement.

For your IVA to be approved, your creditors must agree on the amount of your monthly payments. Once a majority of creditors accept the terms, they must adhere to the rules specified in your IVA proposal and are no longer permitted to contact or harass you about the outstanding debt.

During the IVA, your credit rating will be affected for six years from the approval date, and your information will be listed on the Individual Insolvency Register, which is generally accessed by lenders, creditors, and credit reference agencies. If you own a home, you might be asked to release equity towards the end of your arrangement and send the funds to your creditors.

Your creditors are the individuals or businesses you borrowed and now owe from. They play a significant role in your IVA, but direct contact with them will be minimal as your Insolvency Practitioner handles most communication.

The IP is responsible for collecting your monthly payments and distributing them among your creditors. Since creditors are likely to receive less than the total amount owed during your IVA, they must also vote on the proposed terms before the arrangement can proceed. If a creditor disagrees with any aspect of your IVA, they can vote for changes (known as modifications) during a creditors’ meeting.

Why have my creditors refused my IVA?

If your IVA application is rejected by creditors, there could be a variety of reasons behind it. These may consist of:

You provided incorrect information

As your creditors have likely been working with you for some time, they comprehensively understand your financial situation. This makes it challenging for you to submit inaccurate information or omit crucial details without them noticing. In such cases, the likelihood of your IVA being rejected increases.

The total repayment amount is too low

Upon completion of a five-year term with an Individual Voluntary Arrangement (IVA), your remaining debt is discharged, and you become debt-free. While this is a positive outcome for you, it might result in your creditors receiving only a portion of the amount they are due, making them hesitant to agree to the proposed terms.

Nonetheless, if your creditors have made previous attempts to collect the debt and believe that repayment through other methods is improbable, they are more likely to accept the IVA.

Your IVA proposal is unrealistic

A frequent cause for IVA rejection is the presence of unrealistic terms in your arrangement. At IVA Helpline, we believe that your Insolvency Practitioner (IP) should collaborate with you to develop a payment plan that is both affordable and feasible.

If your monthly payments appear excessively high or creditors question your ability to adhere to the proposed terms, they might reject your IVA to avoid future missed payments. Should your IVA fail due to impractical terms, you’ll be obligated to settle your remaining debt through other, often costlier, methods.