Individual Voluntary Arrangements - The Last Chance Saloon for the Debt-Ridden

Individual Voluntary Arrangements, or IVAs, are a way of tackling finance or debt problems, and are commonly used as an alternative to filing for bankruptcy. The IVA is a type of payment proposal which is presented to creditors, in order for repayments to be reduced to a manageable level. An IVA is a contractual agreement entered into with the creditors, based on income or capital as well as essential expenditure on housing, food etc.

IVAs have been around since 1986, and were designed for sole-trader businesses. They are a way of making an offer to creditors before debts become completely unmanageable and bankruptcy is the only option. Often traders and individuals are concerned about their credit rating as a result of entering into an Individual Voluntary Arrangement, worried that they might end up being blacklisted by lenders or with crippling reductions in the level of credit available.

Credit ratings are based on a number of complicated factors, including age, employment status, marital status and credit history. Credit ratings are calculated individually by each lender when credit is applied for, and they contain a record of credit applications and late payments. Credit ratings are constantly fluctuating based on these factors, and you can obtain a copy by applying to one of the two main credit reference agencies in the UK.

Individual Voluntary Arrangements last for five years, and if you enter into one it will be recorded in your credit history. After five years, if the arrangement has been completed (all creditors paid) then an Insolvency Practitioner can provide a Certificate of Completion. Sending this to the credit reference agencies will ensure that the completion of your IVA is recorded on your credit history, and will increase your chances of being granted credit in the future. Entering into an IVA will probably have an impact for a good number of years, but this doesn’t necessarily mean you will be refused all forms of credit.

You can settle an IVA with a lump sum. It makes sense for everyone – you pay back less overall to your creditors, and they are happier to receive the payments sooner rather than later. While an IVA is usually constructed to last for five years, if your financial circumstances improve then you can make larger payments to settle your debt more quickly. IVAs are a great way of avoiding bankruptcy, and while it will be recorded on your credit history, as long as you fulfil the terms of your agreement you could become debt free sooner than yout hink.