Individual Voluntary Agreement (IVA) FAQs
Here are some frequently asked questions about IVAs.
An IVA (Individual Voluntary Arrangement) is a statutory contract between you and your creditors. You pay back only what you can realistically afford with the remaining debt being written off. Typically an IVA lasts five to six years. The agreement covers all of your unsecured debts, including loans, credit cards, catalogue and store cards, overdrafts etc.
Once your IVA proposal is drawn up, the insolvency practitioner will call a creditors’ meeting. At this meeting, creditors will vote on whether or not they will accept your proposal. Not all the creditors have to agree, for the proposal to be accepted. The proposal is accepted if more than 75% of the creditors who vote or are represented at the meeting vote in favour. If enough creditors vote in favour, the proposal is accepted and is legally binding straight away. All creditors have to stick to the IVA proposal, even if they voted against it.
We will look at your circumstances taking your income, your day-to-day expenditure and debt level into account before suggesting whether an IVA could be right for you. We will never recommend an IVA unless we genuinely believe it is appropriate for you and you are happy to put forward a proposal.
Usually you will:
- have unsecured debts of more than £5,000
- have two or more unsecured creditors
- have a monthly surplus of at least £85
Debt Movement views the IVA as a flexible financial plan, which revolves around your needs and puts you back in control.
The IVA monthly payments should be as much as you can reasonably afford after you have accounted for your living costs and those of your dependants. The amount should be realistic – whatever you propose should be viable for the duration of the proposed IVA.
An IVA can only be prepared for you by a qualified licensed insolvency practitioner, so there are inevitable professional fees. Our fees are payable from your monthly contributions to creditors, so you do not need to make any other payments besides your monthly IVA contributions.
We keep IVA costs low by collecting much of the required information from you and using tailor-made automated procedures and specialist administrators to process cases.
We earn our fees, like other IVA companies, in two ways:
- Nominee fee (the fee for putting together the IVA proposal and presenting it to your creditors) for a simple IVA is a fixed fee and will be laid out in your IVA proposal document.
- Supervisor fee (the ongoing fee for managing your plan and liaising with your creditors) for a simple IVA is a fixed fee and will be laid out in your IVA proposal document.
If you are a sole trader, director of a limited company or have complicated affairs our fees may occasionally be higher – but we will explain the reasons why they are higher than our standard – and this still will not alter the payment you make. If the creditors do not approve the IVA, then you will not be liable for these fees.
As the fees form part of your proposal document, these must also be approved by creditors. As the fees are payable from your monthly contributions, sometimes creditors ask for our fees to be changed (modified) to increase the amount of money available to them to go towards repayment of the debts.
There are also other costs known as expenses and disbursements. These are costs that are paid to third parties during your IVA and include insurance to protect any money paid to your IVA and a registration fee to register the IVA with the Insolvency Service. The cost of any legal advice specific to your case may also be charged as an expense. If you own a property the cost of any valuations of your property and land registry fees will be applied.
Debt Movement will typically request that creditors approve our fees on a fixed fee basis, so the Nominee and Supervisor fee we charge will include all expenses and disbursements to third parties.
It depends on how quickly we receive the required information from you. The quicker we receive information from you each time it is requested, the quicker we will be able to move forward. We want you to get the certainty of an IVA as soon as you can.
If we receive all the required information/documentation from you as soon as it is requested, Creditors could hold the virtual meetings within 3-4 weeks.
Not everyone needs to open a new bank account. If you have debts with your bank, they can take money owed from the account your wages are paid into, whether you can afford it or not. This is called the Right of Set-off. Such debts can be in the form of an overdraft, credit card balance or personal loan.
Therefore, we do advise that you arrange a new basic banking facility before starting your IVA if your current bank holds some of the debt that is to be placed in the IVA. We know it may sound daunting, but we can help you through it.
People entering an IVA usually already have some adverse credit history and find it difficult to open a bank account. In this case, you need to open a non-credit bearing basic account. Talk to one of our advisors for more information.
One of the key advantages of an IVA is that it binds your creditors, legally, to freeze all future interest on your debt. Which means your debt level will freeze upon approval of your IVA.
As long as you make all the payments into your IVA and keep up with the terms, when your IVA is successfully completed, your debts will be written off.
If you are unable to keep up with your repayments, we will work with you to help you along your journey. If we are unable to rescue your IVA after it has defaulted, all interest and charges can be added again after creditors receive notification of the IVA’s termination.
If you don’t qualify for an IVA, we will refer you to a company authorised and regulated by the Financial Conduct Authority (FCA) to give you full debt advice.
If your IVA proposal is not approved, we will speak to your creditors to understand why it was rejected and see if there are any changes we can make to the proposal to gain approval. We can adjourn the virtual meeting of creditors for up to 14 days from the original meeting date.
If, after the end of the 14 days, your proposal is still rejected, we will then discuss alternative options with you.
After your IVA is approved, creditors cannot take any legal action against you, such as putting a charge on your property. Providing that you keep up with the payments on your mortgage/secured loans, your property is protected. Your creditors may require you to raise some funds from your property by way of re-mortgage in your final year of the IVA if there is available equity (the amount left after your mortgage and other secured creditors have been considered).
If you have less than £5,000 of equity in your home, it is unlikely the equity in your house will be included in your IVA.
Please read the equity clause within your proposal to find out more or speak to one of our team.
Yes, of course. You can rent a property, be part of a shared ownership scheme or live with parents whilst in an IVA.
While you are in an IVA, you are unable to obtain further credit exceeding £500 without specific approval from your Supervisor. Therefore if you are considering buying your own home while in an IVA, you must first speak to your Supervisor and obtain their consent.
If you can secure a mortgage and provided your monthly mortgage payment is no greater than your monthly rent, and you are up to date with your IVA payments, your Supervisor is unlikely to have any objection. You must also be able to confirm that the costs of running the new property will not be greater than those of your rented property.
You may have loans other than your mortgage that are secured on your home. The most common will be ‘homeowner loans’ or ‘debt consolidation loans’. Secured loans cannot be included in your IVA and must still be repaid as well as your monthly IVA payments.
If you do not continue to make payments on your secured loans, your assets (home, car) could be at risk.
Yes. All assets owned by you (other than household items) need to be included in the IVA, and if there is equity you may need to make additional payments to creditors in lieu of the asset; it is unlikely that you will need to sell it.
Yes, of course. However, IVAs for self-employed people generally require additional income and expenditure documentation, including a cash flow projection, to make sure that your business is sustainable for the duration of your IVA.
Yes, you can. IVAs have helped thousands of sole traders, partners or company directors remain in business when faced with severe financial problems.
If you are a director of a limited company, generally you can retain your position whilst in an IVA, which is not the case should you be declared bankrupt. However, always check your Company’s Articles of Association to determine if there are any restrictions on acting as a director if you enter an IVA.
Many directors provide personal guarantees to their company creditors to secure lending. If your business faces financial difficulty and closes, you will be personally liable for these company debts. As well as your personal debts, we can help with your personally guaranteed debts.
Unlike bankruptcy, an IVA does not legally restrict your ability to hold positions such as a Justice of the Peace or school Governer. However, there could be restrictions in the case of a Company Director depending on what the Company’s Articles of Association states.
It can also be the case that it is written into some employer’s terms of employment that entering into an IVA affects their employment, particularly if they work in the area of finance.
Yes, as long as you have a monthly surplus of at least £85 and meet the other criteria, you can apply for an IVA.
If you have joint debts, then you are both liable for the whole amount of the joint debt, even if only one of you goes into an IVA. An IVA will only deal with your liability. Any joint party will remain responsible for the repayment of the whole of the debt outstanding.
Where there is a possibility that an IVA may adversely affect another person, we will advise the affected party to take independent advice. However, they could also apply for an IVA.
The terms and conditions of IVAs require you to disclose any redundancy payment that you receive to your Supervisor.
We will look at your circumstances individually, at how much you will receive as part of your redundancy package and depending on the size, will decide how much of it (if any) you will need to pay into your IVA.
You are entitled to retain a sum equivalent to 6 months’ net take-home pay with any surplus above that amount being due to your arrangement, on the basis you can secure alternative employment within that period. If you secure employment in a shorter time frame, please note that the balance of any funds you retained would then also fall due to the IVA.
If you become employed again within six months, we will review how much of your redundancy you will then need to contribute toward your IVA and what your monthly payments will be going forward.
If you are not in employment at the end of six months, we will need to re-evaluate your circumstances and affordable monthly payments.
It may also be possible to introduce a lump sum from your redundancy payment to settle your IVA early. If that is an option that you wish to discuss, please do not hesitate to contact us.
Depending on your circumstances, we may be able to offer a short term payment break to give you time to regain employment and return to a position of being able to afford your monthly repayments. We will also look at whether we need to adjust the amount of your repayments based on your new income.
It is worth noting that a payment break does not mean that the missed payments will be removed from your plan. You will need to repay these by either extending your plan, increasing your payments temporarily or making a lump sum payment.
We understand the impact losing a job can have on your personal life, and we will always do our best to find a solution that fits your circumstances, which is why you must call us as soon as you anticipate any changes.
You may also be able to ask your creditors if they will vary (change) the terms of your IVA to accommodate your change in circumstances.
It will depend on individual circumstances and your Maternity Pay entitlement. We can look at reducing your monthly payments temporarily to reflect your decrease in salary during your leave.
We may also be able to offer a payment break from your IVA to allow you to adjust before we reintroduce payments. It is worth noting that a payment break does not mean that the missed payments will be removed from your plan. You will need to repay these by either extending your plan, increasing your payments temporarily or making a lump sum payment.
When your maternity leave comes to an end, we may need to assess your circumstances to account for any financial changes to your situation. For example, if you decide to go back to work part-time and your income is reduced, you may have child care costs, or you may be entitled to child benefits which will see your income increased. Any changes will then need to be reflected in your future payments.
You may also be able to ask your creditors if they will vary the terms of your IVA to accommodate your change in circumstances.
If your monthly income increases, you will need to let us know so that we can look at how this affects your IVA. If your monthly income increases, it is expected that your payments will eventually increase with it.
At the end of every 12 months during your plan, we will conduct an Annual Review to look at any changes and make sure that your payments are still affordable and reflective of your monthly surplus.
If you are struggling to make your monthly payments, the first thing to remember is don’t panic! We are here to help and we always have a solution. As soon as you find yourself struggling, you must get in touch with us to see what we can do for you. Remember, you are not alone!
We don’t want any of our clients to be worrying every month about whether they can make their next payment. We will always do our best to make sure your IVA works for both you and your creditors.
We can take a look at your arrangement and any long-term changes in your income and expenditure to see if we can make what is known as a ‘variation’ to your plan.
Suppose there have been short-term changes to your income or expenditure or perhaps you have suffered an unexpected expense, (such as for a car repair or replacing a washing machine), we will take this into account and could look at the possibility of a payment break or a change to your monthly payments.
The role of the IP in your IVA is to manage the payments to your creditors and act as a point of contact for them. They will negotiate the terms of your IVA and work on your behalf to seek approval of your proposal. As the IVA is legally binding, you cannot propose one without an IP to oversee it.
Having a qualified professional looking after your IVA takes the worry of having to deal with creditors and, as IPs are industry regulated, are bound by a legal code of practice.
Creditors have 28 days after the meeting of creditors to appeal but there must be grounds for this.
Once the IVA has been approved, all of your included creditors are bound by the terms. And as long as you maintain your obligations, (i.e. keep up the payments and tell your Supervisor if your circumstances change) they cannot take any further action against you or demand a higher repayment from you.
For your proposal to be approved, at least 75% of your voting creditors by value must vote to approve the request. The good news is that even if some creditors reject your proposal, as long as the approving creditors hold 75% of the value, the proposal will be accepted and the creditors who objected will still be bound by it.
An IVA will show on your credit file for six years after the approval of your proposal. When you complete your IVA, we will provide you with a Certificate of Completion, which you can show anyone you wish to confirm that you have completed your arrangement.
We will also send a copy of your Certificate of Completion to your creditors so they can update their systems and inform the credit reference agencies.
Debt Movement is not able to make amendments to your credit file.
If you make all your monthly contributions and stick to the terms of your proposal, then you will not be required to pay any more than what was agreed in your IVA. Your creditors will write off any remaining debt you had, and you will officially be free from your unsecured debt!
Within two months of the anniversary of the date on which your IVA was approved, we are required by law to compile and issue a report to both you and your creditors to show the arrangement’s progress. The Annual Progress Report is a standard document and – in addition to commenting on your conduct and compliance in respect of the IVA’s terms and enclosing a copy of your most recent income and expenditure review – it will also detail all monies received into your IVA in the reporting period (and since its approval). It will also outline what has been done with those funds.
Windfalls (or “After-acquired Property” as it may be known within an IVA) typically arise where you receive or become entitled to an asset during your IVA. After acquired property relates to a wide range of potential assets which include, but are not limited to, the following:
- Lottery wins
- Gambling wins
- Personal injury claims
In some cases, if the value of the asset is less than £500, you can retain it in full, but in others, any windfalls would be due to the IVA (it depends on the terms and conditions of your specific IVA). The key thing to remember as regards to windfalls is that you must contact us and make us aware of them, if you don’t it may bring about the failure of your IVA so you must make us aware of any such assets as soon as possible.
You should also be aware that the payment of a windfall into an IVA will not bring about a reduction in the IVA’s duration or alter your payments unless the windfall sum is sufficient to repay your debts in full (and discharge the fees and costs associated with the IVA). Or unless we can assist you in negotiating an early settlement of the IVA through a renegotiation of the terms (known as a “variation”).
If you do receive or become entitled to a windfall during your IVA, please contact our team who will ensure that you are given the correct advice having regard to the specifics of your case.
If there is any change to your circumstances that will affect your ability to manage your payments to the IVA (or any other obligation), you should let us know right away. The sooner we know about a problem, the sooner we can assist you in resolving it. A solution of some sort is achievable in the vast majority of cases. The important thing to remember is that we are here to assist you and so you shouldn’t hesitate to get in touch.
The Supervisor will have some discretions available to them to potentially reduce your payments, grant payment breaks and extend the term of your IVA and so almost every problem has a remedy. If the change in circumstances is likely to have a long-term effect, then you may need us to assist you in trying to renegotiate the terms of your arrangement with your creditors through a formal “Variation” to the terms.
An IVA will typically allow you to keep your home on the basis that – instead of selling it – you attempt to release equity (the difference between the value of your home and the amount you have left to pay on your mortgage) for the benefit of the creditors. Your IVA proposal document will detail the specifics of this requirement. However, in most cases, you are obliged to attempt to release equity six months before the anticipated end date of your IVA.
The first step in that process is to assess the value of your equitable interest. To do that, the Supervisor of your IVA will need you to provide them with:
- A current property valuation (this will advise the Supervisor of the current value of your property and can be obtained from an estate agent or online);
- A current mortgage redemption statement (this will advise the Supervisor of the amount that you still have to pay in respect of your mortgage and is available on request from your mortgage provider); and
- If you have any other loans or charges secured against your property, you will also need to provide a redemption statement for those (this will advise the Supervisor of the amount you still have to pay in respect of those loans and is available from the lenders)
Once the Supervisor receives that information, they will calculate the value of your equitable interest and – depending on how much is available – will then advise you as to what action (if any) you need to take. In general, there are two possible outcomes:
If your equitable interest is determined to be £5,000 or greater, you will need to take some independent financial advice and try to remortgage. If the financial advisor can secure a suitable loan product for you, you will need to provide Debt Movement with details of the loan and obtain our consent to receive the loan. The loan can then be progressed, and the full value of your share of the loan should be paid directly to us by the lender; or
Suppose your equitable interest is determined to be less than £5,000. In that case, you will not be required to do anything – your equitable interest will be excluded as an asset of your IVA because it has a minimal value.
If your equitable interest is determined to be £5,000 or greater, but you are unable to secure a remortgage or secured loan product, you will be obliged to either:
- offer a third-party lump sum equivalent to 85% of the value of your interest in the property; or
- make 12 additional monthly contributions (with the aggregate sum due to be to the IVA paid being limited to 85% of the value of your interest in the property).
This obligation is a significant and important one so if you have any queries or concerns about it, please get in touch with us and we will be happy to help.
The Supervisor of your IVA is required to issue an annual progress report to you and your creditors within two months of the anniversary date of the approval of your arrangement. That report will help you understand how the arrangement is progressing and whether any issues need attention, so please ensure that you read those reports each year.
Most IVAs anticipate that contributions will be payable for 60 months with a possible additional 12 months’ payments being required if you are a homeowner and have more than £5,000 equity. As such, your final payment will usually fall due 5 or 6 years after the approval of your proposal. However, it is not uncommon for unforeseen changes in an individual’s circumstances to arise during an IVA and – to deal with those changes – you may need to seek alterations to your payment schedule, extending the terms of your IVA. Similarly, if you miss payments to your arrangement or need more time to fulfil other obligations under your IVA, then the term of the arrangement might also change.
In broad terms, our ability to close an arrangement will be impacted by an outstanding obligation that needs to be addressed. The most common obligations that arise will typically relate to the following:
An outstanding Income and Expenditure review;
- An outstanding requirement concerning any obligation to release equity;
- An outstanding amount due to the IVA in respect of additional income;
- Unresolved arrears that accrued in respect of missed payments during the IVA; and
- An outstanding matter concerning investigations into mis-sold Payment Protection Insurance (PPI).
If you don’t think that there are any outstanding obligations and your IVA should be completed and it has not, please just get in touch and we will review your case and provide you with an update.
The agreed terms of your IVA may state that PPI or similar claims are assets of your arrangement. In broad terms, most IVAs approved since 2012 will include such a clause which will explicitly refer to PPI. In older cases, the standard terms and conditions of the IVA will typically include what is called an “All Assets Clause”, a common term that essentially states that all assets – including PPI – will be an asset of the IVA unless creditors agreed to their exclusion from the arrangement.
By paying in any redress concerning mis-sold PPI, this will improve the return to your creditors. You will still need to make your monthly payments in line with the terms of your IVA proposal unless the compensation is enough to pay your creditors and the IVA fees and costs in full.
Yes, the case of Green v Wright confirmed that the PPI is due to the IVA even after completion or termination.
Depending on the terms of your IVA, you may be entitled to an element, known as statutory interest, of the redress awarded.
Given the high volume of PPI payments that claims management companies are dealing with and the corresponding volume that is then forwarded to Debt Movement for allocation to the correct account, the reconciliation process can take up to 60 days to complete, which may delay the processing of any refund due to you.
If you are unsure as to the status of the investigation of your claim, please be advised that your claims management company is in the best position to advise you. Please contact them directly for an update.
When the Supervisor of your IVA is satisfied that all obligations have been fulfilled, we will issue a final report together with a Completion Certificate. A copy of that report will be sent to you, each of your creditors and the Insolvency Service advising that the IVA is now closed.
The final report will include information regarding all of the funds received into the IVA and what has been done with those monies. It will also show how much of your debt has been repaid (the dividend) and how much has been written off by your creditors.
Debt Movement does not have any remit to update your credit file – that responsibility rests with your creditors. They will typically take steps to update your credit file data around eight weeks after we issue your final report. Please visit the Equifax, Experian and Call Credit websites for more information on your credit file and actions that you can take to ensure that the information held is accurate and up to date. Please also ensure that you keep a copy of your IVA final report and Completion Certificate safe as you may need it to evidence that the IVA has come to a successful conclusion.
Yes. We will file the necessary statutory form at Land Registry within two weeks of the issuing of the final report.
The Personal Insolvency Register is administered by the Insolvency Service or the Northern Ireland Insolvency Service. We will send them a copy of our final report confirming the completion of the IVA and they endeavour to update the register within three months of being notified. However, it is often updated much sooner than that.
You may be able to change the terms of your IVA with the agreement of your creditors. This agreement is known as a variation. A variation involves preparing a report to your creditors, convening a virtual meeting of creditors — similar to the one at the start of your IVA when it was approved — and your creditors deciding on your proposed changes. Variations are typically called following a change in circumstance and we will need information from you before we can prepare a variation report.