IVA FAQs | IVA Questions Northern Ireland

What is an IVA?

An IVA (also known as an Individual Voluntary Arrangement) is a legally binding debt repayment agreement between an individual in debt (debtor) and the people he or she owes money to (creditors). It was introduced to the UK as part of the Insolvency Act 1986 and introduced to Northern Ireland in 1989 as an alternative to bankruptcy.
In a standard IVA in Northern Ireland, the debtor offers to pay one affordable amount each month as a contribution towards repaying their debts, over a fixed period - usually 60 months. The total amount repayable in an IVA is usually less than the total amount of debt - and the creditors are bound by the terms of the IVA to accept this as final settlement.

How long does an IVA last?

The majority of IVAs normally lasts for 60 months (5 years).

An IVA can in some circumstances be completed in just a few months, but this would normally involve introducing a lump sum towards the IVA.

Some arrangements may last more than 5 years to introduce payments in lieu of a remortgage (if applicable to your case) and in exceptional circumstances a small number of arrangements last more than 6 years. Once your circumstances have been taken into account your proposals will set out how long your IVA can last.

Who Can an IVA Help?

Anyone in Northern Ireland with debts over £15,000 and a stable income could benefit from an IVA.

How Much Does an IVA Cost?

When debtors propose an IVA to their creditors, they offer to re-pay a percentage of the debt via monthly installments. The sum suggested is based on what the debtor can afford to pay.
This means that the monthly debt re-payments vary on a case-by-case basis. They depend on what assets the debtors have and how much money they have available after their living expenses have been deducted from their monthly income.
However, there does tend to be a minimum amount that creditors will accept as part of the IVA proposal. An IVA is usually rejected if it offers to pay the creditors less than 20-25% of what they were originally owed.

What Happens When an IVA Has Been Completed?

At the end of the IVA process the supervisor will give you a "Statement of Completion", normally within three months of the final payment. A copy of this will also be sent to the Insolvency Service for their records. You are then officially Debt Free.

What Happens if I Default on my IVA Payments?

If you don't keep to the terms of your IVA and default on your IVA payments then the supervisor of the IVA can start bankruptcy proceedings against you.

What are the Advantages of an IVA over Bankruptcy?

Setting up an IVA does not have any of the same stigmas or disqualifications associated with bankruptcy. Unlike bankruptcy, an IVA is a private agreement with your creditors which means that it does not get publicised. There are also no professional disqualifications and you maintain your right to hold public office. Furthermore, bankruptcy proceedings are much more costly for the debtor and creditor than setting up an IVA.

Will my IVA be publicised?

No. Your IVA will not be publicised, which is why some people see it as a good alternative to Bankruptcy. In Bankrputcy the details of your bankruptcy are made public.

Can I Setup an IVA if a Bankruptcy Order Has Been Made Against Me?

Yes, If the Bankruptcy hearing has not taken place yet this is possible, the Insolvency Practitioner may have to issue an Interim Order to halt proceedings while an IVA proposal is put together. If the Bankruptcy Order has already been issued it is still possible to propose an IVA, however it is more difficult to reach an attractive proposal to the creditors as the bankruptcy costs must be taken into account on top of the costs of setting up the IVA.

Will I Have to Sell My House if I Set Up an IVA?

Unlike bankruptcy, with an IVA you will not be forced to sell your home. However you might be asked to release some of the equity in your property to pay your creditors. See our remortgaging section for more on this.

Will My Creditors Agree to an IVA?

In order for your IVA to be accepted, 75% of your creditors, by debt value, have to vote in favour of it. In our experience there are certain things that make a creditor more likely to accept an IVA proposal. For instance, you should never propose to repay less than 25% of the total debt.

If I Set Up an IVA Will Anyone Interfere With the Running of My Business?

As long as you stick to the terms of your IVA, you can carry on running your business under your sole control and without any outside interference.

Does an IVA Affect My Credit Rating?

Whilst the IVA is in place you are not allowed to take out any further unsecured credit such as credit cards, store cards, personal loans, etc. This is a standard stipulation of an IVA and a note will be put on your credit file alerting potential lenders to the fact that you have entered the agreement. This note will remain on your credit file for a total period of six years (i.e. normally one year longer than the duration of the IVA). While this record is on the credit file many lenders will choose either to lend at a high interest rate or not at all. There are some lenders who specialise in mortgages or secured loans for people with previous credit problems, contact Clear Start should you require help in this respect.