An IVA or Individual Voluntary Arrangement (Trust Deed in Scotland) is a legally binding agreement between you and your creditors that allows you to repay your debts in affordable monthly payments over a fixed period of time. It is usually calculated using an income and expenditure form and allows you to pay a single, reduced, affordable, monthly payment for a period between 3 (for Trust Deeds) and 5 (for IVAs) years, after which the unpaid part of the debt is written off by the creditors. The creditors are aware of this and are in agreement with it.
During the repayment period all interest charges are frozen and all demands for money are stopped.
IVAs are generally organised by a Licensed Insolvency Practitioner, who then administers the arrangement. Usually advice companies will be able to put you in touch with insolvency practitioners, but you should to be aware of their fees and if they request any money upfront.
They will then ask you a number of questions about your income, outgoings and general financial situation to make sure that you are actually able to afford the monthly payments. They will prepare a detailed IVA proposal on your behalf, which is issued to your creditors. The proposal, based on information that you provide to the insolvency practitioner, will include the amount of your monthly disposable income that you will repay into the IVA. When the repayment proposal is complete, an Interim Order is put forward to your creditors - during this time, they may not pursue any further legal action against you.
A meeting of your creditors will then be arranged to vote on the proposal. If your proposal is agreed by more than 75% of your creditors, it will become legally binding and you will begin paying off the debt. All your creditors will be bound by it – even those who voted not to accept your proposal.
After you have made the payments for the agreed amount of time, the rest of the debt is written off, and you are no longer liable to your creditors.
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