Individual Voluntary Arrangements

IVAs are designed to help people who have fallen behind on their debt repayments, to one or more creditor, renegotiate the terms of their loan. Whilst your creditor is not compelled to accept your request for an individual voluntary arrangement, they will often consider it if the alternative is you declaring bankruptcy - in which case they would receive less of their money back.

An IVA can give you much needed time in which to organise your finances and can allow you to deal with repayments that are altogether more manageable. However you should be aware that IVAs do carry a degree of risk and should not be agreed to without the proper amount of care and thought.

This guide will explain exactly which debts may be placed onto an individual voluntary arrangement and which debts fail to qualify.

Debts that can be placed on an IVA

Many different forms of debt can be incorporated into an individual voluntary arrangement. The following debts are the ones that IVAs are most commonly used for:

These debts all fall into the category that is referred to as "non-priority debt". Once your IVA has been accepted you will then be able to place other debts, labelled "priority debt", into the arrangement, such as:

Mortgages and secured loans

Secured loans are debts that you take out with the understanding that a piece of your property will be given up if you fail to keep up with the loan. This means that if you do not manage to stay on top of your debt, your creditor will be completely within their rights to take possession of the property that your debt is secured against.

You are allowed to include a secured loan into your individual voluntary arrangement but your creditor is under no obligation to accept this proposal. It is actually very unlikely that your creditor will allow you to do this because the only real incentive a lender has to accept an IVA is the fact that they may not be paid otherwise, in the case of a secured loan the lender can simply take the property to recoup their outlay.

How much debt can I put on an IVA?

There is no limit to the amount of debt that you can put onto an IVA but it is worth noting that if your debt is under £10,000, there is a strong chance that your creditor will not agree to the arrangement.

There is also no limit to the number of different debts that you place on to an IVA but again it is worth noting that this form of debt solution is typically suited to people with over three debts to more than two lenders.

Debts that do not qualify

There are a few types of debt that cannot be included in your IVA, these include:

If you have these debts in addition to the ones that you are going to include on your IVA, you should make sure that you are able to afford to repay them alongside the repayments that you will be making on your individual voluntary arrangement.

Forgotten debts

Once your IVA has been approved you may realise that there are some debts that you have mistakenly not included in the arrangement. If this is the case, it is imperative that you inform your insolvency practitioner as soon as you realise. Any creditors that fall into this category will be classified legally as "unknown creditors" and your IVA should already have set out terms and conditions regarding the way in which these creditors will be repaid.

These unknown creditors may be unhappy with the IVA that you have set up with your other lenders. If this is the case, they must make a formal challenge to the court but this must be done within 28 days of being added to the IVA, otherwise they will be forced to accept the existing terms and conditions.