Get help and advice about your debt problems
Individual voluntary arrangement
An individual voluntary arrangement (IVA) is an agreement between a debtor and their creditors.
The agreement sets out how creditors will be repaid and normally entails setting up monthly payments over a certain period of time, such as five or six years. Alternatively, if an asset such as property can be sold, the agreement may specify that a lump sum is raised and used as payment.
An IVA is an alternative to bankruptcy and its use has increased in recent years. The potential advantages include the following:
- it costs less than bankruptcy
- creditors often get more than they would through bankruptcy proceedings
- debtors avoid the stigma and restrictions of bankruptcy
For more alternatives, see our guide on insolvency options for individuals.
An IVA, when in place, is binding on all creditors. The general steps to obtain an IVA are as follows:
- The debtor arranges for an insolvency practitioner to be their nominee. A proposal is drawn up showing why it is in the interests of the creditors. The proposal shows details of funds and assets available for the creditors.
- If there is impending legal action, the debtor can also apply to the court for an interim order. This stops creditors from continuing or starting legal action against the debtor for repayment of their debts. If the court grants this order no creditor can petition for bankruptcy.
- A meeting of creditors is called. The meeting decides whether to accept or reject the proposals. If the proposals are agreed, they are binding on all creditors who had notice of the meeting.
- If the meeting approves the proposals, the nominee takes charge of the assets. They are administered for the creditors in accordance with the proposals.
- An important proviso - no proposal may, without their consent, reduce the rights of preferential creditors. The same applies to the rights of secured creditors.
To find out where to get more help and information about IVAs, see the page in this guide on debt advisory bodies.
Subjects covered in this guide
- Preparing to seek help if you find yourself in debt
- Debt advisory bodies
- Debt advice from accountants or solicitors
- Debt advice from your bank
- Debt counsellors
- Winding up, bankruptcy, receivership and administration
- Individual voluntary arrangement
- Negotiating debt restructure
