IVA is a legally binding agreement between a person and his creditors and helps the debt ridden person to make a formal proposal to settle the debt burden. Once the agreement comes into force, monthly payments for the outstanding debt is fixed on an affordable disposable income of the person. When the final payment is made, the remaining debt(if any) is legally written off. The arrangement can write off up to 65% of the total debt burden depending upon the circumstances.

One of the important aspect of the agreement is full and final IVA. In this case, a lump sum amount is paid to creditors while the debtor is in the process an IVA. This process is often used when someone has no significant disposable income to offer their creditors on monthly basis but can afford a lump sum that is less than the total original debt. The creditors usually accept the lump sum payments and go for final settlement as the creditor has no means to carry on paying and no other funds.

The first step to go for individual voluntary agreement to contact an Insolvency Practitioner and discuss your case. The Practitioner will need proof of the funds and if it is house equity he may need a mortgage offer. Once the Practitioner have this, he will write to your creditors and request a creditors meeting. This process normally takes 21 days. Once the majority of your creditors agree you will need to pay over the funds to your IP and they will then distribute it to your creditors accordingly.

In order to apply for an Individual Voluntary Agreement, you are required to fulfill the following criteria:

1. Your debt burden must be over £15,000.

2. You must have owed to 3 or more debts to different providers. If the debts are from the same bank agreement can not come into force.

3. Your disposable income must be over £200 per month or you have assets to release. In the absence of the both a 3rd party should be prepared to contribute into the arrangement.

4. You must be able to pay lenders at least a 25 pence in the pound dividend. In simple terms, you should possess the capacity to repay a quarter of the total debt.

5. Besides all of the above mentioned requisites, you must also have a regular source of income. If self employed, you will have to show that you will be able to make regular payments. IVA cases generally fail when the individual’s income is irregular or unreliable.

When the individual fails fulfill all the above requirements, the IP generally recommends an alternative solution for the debtor such as debt management and or debt counseling. 75% of the creditors need to agree to the terms of the proposed Individual Voluntary Agreement for success. When 75% agree, the remaining 25% are under obligation to comply with the agreement. You are advised to be honest with regards to all the above conditions. It will only make your IVA process time consuming further if any of the information is found to be inaccurate.


For more information about loans: Bridging loan , Funds without any constraints , How to avoid pitfalls while clearing debts