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Do I qualify for an IVA?

In order to know whether you qualify for an IVA it is necessary to provide full details of your income, your assets and your debts.  Once this information has been provided an analysis of this will indicate if you qualify for an IVA.  There are other debt solutions which you may wish to choose even if you qualify for an IVA and it is important for you to consider these options before you make a final decision.  For information and advice about other debt solutions you should seek assistance from an FCA authorised debt counselling organisation such as the Money Advice Service.

Examples of IVA Cases:

Standard Consumer IVA

Mr Smith owed £1,500 to credit card company 1, £3,000 to credit card company 2 and £500 to his bank. Due to a recent change to his employment he was left with only £70.00 per month after paying his rent and all household bills. Mr Smith did not own any assets of value other than his car which was required for commuting to work.  A detailed analysis of Mr Smith's finances demonstrated that £70.00 per month was a fair payment for him to make.  Mr Smith proposed an IVA to his creditors who were asked to accept 60 monthly payments of £70.00 i.e. £4,200.   The monthly payments are to be reviewed annually and if Mr Smith's financial position has improved he will be expected to increase his payments.

Mr Smith no longer needs to worry about making payments he cannot afford to any of his creditors.  Provided he keeps up the monthly payments to the IVA he will be debt free within 5 years following approval of the IVA.

Business IVA

Mr Johnson was a professional person whose business failed because following a disagreement with his former business partner.  At the time the business failed Mr Johnson was a sole practitioner employing 15 staff. It was necessary to close the business and to tell the staff they were to be made redundant.  The business had a number of clients for whom it was undertaking ongoing work and the business was also owed money be some of its clients for outstanding invoices.

Mr Johnson owed money to HMRC for unpaid VAT and income tax and also owed money to some business suppliers, his bank and unsecured creditors.  In addition to his business assets Mr Johnson owned a house subject to a mortgage. After the business ceased trading Mr Johnson obtained a new job but his income was only enough for him to be able to pay his household bills with no surplus remaining for paying into an IVA.

An IVA was proposed on the basis that the IVA Supervisor would oversee the collection of outstanding bills and also money due to be paid in the future by the clients who transferred to other businesses to complete ongoing work which the business could no longer undertake.  The tangible assets of the business which such as office equipment and computers were collected by agents and sold with the proceeds being paid into the IVA.

Mr Johnson also proposed that his income and expenditure would be reviewed at regular intervals during the course of the IVA and if he could afford to do so he would pay contributions from his income. He also proposed that he would realise the equity in his property by obtaining a remortgage or secured loan and if this was not possible he would introduce funds equal to the value of his equity from a third party.

Mr Johnson avoided the personal consequences of bankruptcy which could have  had serious implications for him as a professional person.  He was able to arrange a smooth transfer of clients to other businesses and once the IVA was approved he was able to concentrate on his new job knowing that all his creditors (including HMRC) were bound by the IVA.

How much am I expected to pay in an IVA?

You are expected to pay what you can reasonably afford after payment of household bills. For consumer IVAs where creditors are mainly banks and credit card companies the creditors will expect that household bills should follow the guidelines issued annually known as the 'Common Financial Statement'.

You are expected to contribute some of any overtime or additional income you may earn during the term of the IVA and at each anniversary of the IVA your income and expenditure will be reviewed to check if it is reasonable to request you to pay increased contributions.

If you own any assets of value other than your house or a car or pension you will may be asked to sell these to assist in paying your debts. Also if you receive an inheritance or a lottery win you would be expected to pay this into your IVA to clear your debts and the costs of the IVA.

How will my house be affected by an IVA?

Creditors do not expect you to sell your house to repay any of your IVA debts. The payments you make into your IVA will always take account of the amount you have to pay towards your mortgage and any secured loans against your property so that you can be sure you have enough money each month to make these payments.

How do I calculate how much equity is in my property for IVA purposes?

For standard consumer IVAs the calculation of your property equity will be done by firstly by obtaining an online valuation of your property. Your creditors then use as a starting point from which they allow a deduction of 15%. This means that for example if your property is valued at £100,000 your creditors would start the calculation at £85,000.

From this figure is then deducted the balance owed to any mortgagee or secured loan creditor. The interest of any joint owner such as your husband or wife will also be deducted.

If the remaining balance is greater than £5,000 you would be expected to try and obtain a mortgage or secured loan to realise this and pay it into the IVA.

NB - if you are not able to obtain a loan or mortgage from a recognised high street lender of the rate loan repayments will be more than 50% of the agreed IVA contributions you would not be expected to obtain a loan or remortgage. You would instead be asked to pay a further 12 months IVA contributions meaning in a typical case that you would pay contributions for 72 months in place of 60 months.

How much will an IVA cost?

In a typical standard consumer IVA the fees and expenses of your IVA are to some extent related to the amount you pay into the IVA. Fees and expenses are broken down as follows:

Nominee's Fee

This is the fee paid for the work done before your IVA is approved. The fee includes all the fact finding work which is undertaken, the preparation of your IVA proposal and the review of your proposal by the licensed insolvency practitioner who acts as your IVA 'Nominee'. Following this review a meeting of your creditors is held to consider and vote on your proposal.

This fee is typically fixed with the approval of creditors at between £1,000 and £2,000 per IVA.

Supervisor's Fee

this is the fee paid for the work undertaken by the insolvency practitioner and his staff for monitoring the implementation of your IVA proposal, paying dividend payments to your creditors and reporting each year to you and your creditors. In standard consumer IVAs creditors typically will approve this fee at 15% of the amount paid into the IVA which remains after payment of the Nominee's fee.


Disbursements or expenses are incurred in all IVA cases in addition to the Nominee and Supervisor fees. These expenses include fees payable to register the IVA with the Secretary of State, an insurance bond, and other items such as software licence fees, document storage, bank charges which are payable to outsourced suppliers of these services.

How are fees and expenses paid?

For standard consumer IVAs the fees and expenses are payable only if the IVA is approved by your creditors. No payment is required from you as the fees will be deducted from the IVA contributions which are paid by you. After payment of the fees and expenses the remainder is distributed to your creditors. This means in practice that your creditors bear the costs of the IVA and you simply pay into the IVA the contributions you have agreed to pay for the payment term of the IVA.


IVA proposal is to pay 60 monthly contributions of £250 totalling £15,000. After paying all the fees and expenses of the IVA creditors receive repayment of 40% of the debts they are owed.

How do I know my creditors will agree to an IVA?

In February 2008 the major banks and credit card companies agreed with insolvency practitioners a framework for IVA proposals to be followed by all parties. This framework is known as the IVA Protocol(hyperlink required). The IVA Protocol included an agreed set of terms and conditions. The current version of the IVA Protocol and the terms and conditions can be found here - (hyperlink).

If your IVA proposal follows the IVA Protocol and terms and conditions then it is almost certain that your creditors will vote to approve your IVA. If your IVA is not a standard consumer IVA because for example your affairs are unusually complex or you are operating a business then your insolvency practitioner will need to advise you as to the likelihood of your creditors agreeing to the terms you are proposing. In some cases it may be advisable for your insolvency practitioner to discuss the outline terms of your IVA with your major creditors before a formal meeting of your creditors is arranged.

What happens if I can't keep up with the IVA payments?

If you are struggling to manage your IVA payments because of a change in your circumstances such as ill health preventing you from working or due to e.g. overtime being stopped your IVA supervisor has some discretion to allow payment breaks of contributions. If the change is more serious and you are unable to afford to maintain payments for several months or even longer your IVA supervisor will discuss whether it is possible to propose a variation of your IVA which your creditors will be invited to approve. Provided the request is based on a genuine long term change in your circumstances your creditors will almost always agree to the request.

In extreme cases where you have paid some contributions but you simply cannot afford to continue payments due to unforeseen major changes your creditors are likely to accept that you have tried your best. Your IVA supervisor will request that they accept the payments you have made so far in satisfaction of your remaining obligations under your IVA.

What happens to my credit rating after an IVA?

After an IVA has been approved you will normally agree not to obtain any further credit without the IVA Supervisor's consent. This is because if you obtain further credit you may not be able to afford the agreed IVA income contributions. A record of your IVA will be retained by credit reference agencies for a minimum of 6 years and this may mean that you will have difficulties obtaining credit even after your IVA has been successfully concluded. It is important to remember however that your credit rating has almost certainly been adversely affected if you are contemplating an IVA as y you are acknowledging that you cannot repay your debts as required by the terms of your present creditors.

What is a licensed insolvency practitioner?

A licensed insolvency practitioner is an individual who has been granted a licence to practice as an insolvency practitioner by a professional body authorised by the Secretary of State to issue such licenses. Insolvency Practitioners must demonstrate they have the necessary professional skills and qualifications to act as licensed insolvency practitioners and that they are suitable persons to act as insolvency practitioners.

How can the IVA include all my debts?

The purpose of an IVA is to rearrange your financial affairs so that you can pay your creditors something towards repayment of your debts and demonstrate that you are providing them with a better option than if you were to opt for personal bankruptcy. The Insolvency Act 1986 provides that once an IVA is approved all your unsecured debts with the exception of matters such as Court Fines, CSA payments etc are included in your IVA even if some of your creditors have not received notice of your IVA proposal.

What happens if I cannot meet the IVA payments?

Since February 2008 all major lenders and credit card companies have agreed a framework for consumer IVAs and provided that an IVA proposal is based on this framework there is built in flexibility for circumstances arising which mean you may face difficulties meeting the IVA payments. IVA proposals contain provisions for payment breaks of up to 6 months to assist with managing temporary difficulties. If your difficulties may be longer term e.g. unemployment following redundancy creditors will consider sympathetically proposals to vary your IVA by for example agreeing to suspend payments for up to 12 months on the basis that the IVA payment term is extended by 12 months. As long as you act fairly and responsibly towards your creditors it is likely your IVA will be successfully concluded.

Should I obtain advice before I propose an IVA?

Yes - You should obtain advice from an authorised adviser who is able to explain the various options which may be available to you for managing your debts. You are considering making an important change to your financial arrangements which could affect your financial well being for many years. The Money Advice Service is a free service set up by the Government to help people with their financial affairs including debt problems. If you would like to learn more click here

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