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What is an Individual Voluntary Arrangement?

What is an Individual Voluntary Arrangement?

With reports that cases of bankruptcy are set to increase in 2022, we thought we would look at an alternative which might suit some people: an individual voluntary arrangement (IVA). Bankruptcy can be tested in the CII AF1 and J02 exams.

What is an IVA?

An IVA is a formal agreement between the person in debt (the debtor) with the people they owe money to (the creditors) to pay back the debts over a period of time. It offers an alternative option to bankruptcy for people in severe financial difficulty.

An insolvency practitioner (IP) works on behalf of the debtor and collects agreed payments and distributes the money to the creditors.  The IP works with the debtor to come up with a figure that is affordable and paid over an agreed timescale.  They then contact the creditors for agreement.  If creditors holding 75% of the debt agree to the IVA, then it is put in place and can start.  Payments usually continue for 5 years.

The IVA is added to the IVA Register and then taken off 3 months after the IVA ends.

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Who will find IVAs useful?

IVAs may be useful for those people who:

  • have at least 2 separate debts with two separate creditors
  • have debt of more than £10,000
  • don’t want to deal with their creditors directly
  • can keep up the repayments

What are the benefits of an IVA?

The benefits of an IVA over being made bankrupt include that:

  • it’s legally binding on the creditors
  • it usually lasts 5 years
  • creditors often accept that only part of the debt will be repaid (the rest is written off)
  • the debtor is closely involved with the process
  • bankruptcy is avoided, including the restrictions that come with this and the stigma attached to being made bankrupt
  • costs are usually less than bankruptcy costs
  • the debtor will not lose their home (although they may be asked to remortgage)

Grab the resources you need!

If you’re studying for your CII AF1 exam, and you’re wanting to feel confident on exam day, you’ll need to prepare as much as possible. Grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF1 calculation workbook taster now!

Click here to download our free calculation workbook taster for CII AF1

Alternatively, you can download the taster for J02 if you are preparing for that exam.