An Individual Voluntary Arrangement (IVA) is a formal debt solution in the UK designed to help individuals manage and repay their debts in a structured, legally binding way. If you’re considering an IVA, it’s essential to understand the legal framework that governs this process. Knowledge of the laws, rights, and obligations involved will help you make informed decisions about your financial future.
This guide will walk you through the legal aspects of IVAs, making it easier to understand how they work and how you can apply for one through our expert services.
What is an IVA?
An IVA is a legally binding agreement between you and your creditors, overseen by a licensed insolvency practitioner (IP). It allows you to repay a portion of your debts over a fixed period, typically five or six years. Once the IVA is completed, any remaining qualifying debt is legally written off.
The Legal Framework of IVAs
IVAs are governed by specific legislation, primarily:
- The Insolvency Act 1986: This is the primary legislation that lays out the rules for IVAs in England, Wales, and Northern Ireland.
- The Insolvency (Scotland) Regulations 1986: Separate provisions apply in Scotland, where the equivalent process is called a Trust Deed.
- Insolvency Rules 2016: These rules provide detailed procedures on how IVAs are proposed, implemented, and supervised.
Key Legal Features of an IVA
- Legally Binding Agreement
Once approved by creditors, an IVA becomes legally binding on all parties. Creditors included in the arrangement cannot take further legal action against you, such as pursuing County Court Judgments (CCJs) or enforcement orders.
- Protection from Creditors
Creditors must adhere to the terms of the IVA and cannot demand additional payments, charge interest, or harass you for repayments outside of the agreement.
- Supervision by a Licensed Insolvency Practitioner (IP)
The IVA process must be managed by an IP, who acts as a mediator between you and your creditors. The IP ensures that the arrangement is fair and follows legal procedures.
- Strict Eligibility Criteria
To qualify for an IVA, you must meet certain legal and financial criteria, including:
- Having unsecured debts (e.g., credit cards, personal loans, overdrafts) typically exceeding £6,000.
- Demonstrating an ability to make regular monthly payments towards the arrangement.
- Showing a genuine intent to repay creditors within the IVA framework.
Steps in the IVA Legal Process
- Initial Consultation
The process begins with an initial assessment of your financial situation. A debt advisor or insolvency practitioner will evaluate your income, expenses, and debts to determine if an IVA is suitable.
- Drafting the IVA Proposal
Your IP drafts a detailed proposal outlining:
- The total amount you owe.
- How much you can afford to pay each month.
- The duration of the repayment plan.
- Any assets you will include in the arrangement.
- Creditor Voting
The proposal is sent to your creditors, who vote on whether to accept it.
- At least 75% (by value of debt) of voting creditors must approve the IVA for it to go ahead.
- Creditors who do not vote are still bound by the outcome if the proposal is accepted.
- Approval and Implementation
Once approved, the IVA is legally binding. The IP oversees payments, distributes funds to creditors, and ensures compliance with the agreement.
At the end of the IVA term, provided all payments have been made as agreed, any remaining debts included in the IVA are legally written off, giving you a fresh financial start.
Legal Rights of Debtors in an IVA
- Protection from Legal Action: Creditors cannot pursue legal actions such as bankruptcy proceedings once the IVA is approved.
- Right to Fair Treatment: Your IP ensures that creditors treat you fairly under the IVA agreement.
- Discharge of Remaining Debts: On successful completion, all qualifying debts included in the IVA are discharged, and creditors cannot chase you for the balance.
Legal Obligations of Debtors in an IVA
While an IVA provides protection, it also comes with responsibilities:
- Adherence to the Agreement: You must make payments as outlined in the IVA proposal.
- Full Disclosure: Provide accurate and complete information about your financial situation to your IP.
- Report Changes: Notify your IP if your financial circumstances change, such as losing your job or receiving a windfall.
What Happens if an IVA Fails?
If you’re unable to meet the terms of your IVA:
- The IP may try to renegotiate the agreement with creditors.
- Creditors can resume legal action, including bankruptcy proceedings.
- Any protection offered by the IVA is lost.
This underscores the importance of choosing an IVA only if it’s a realistic solution for your financial circumstances.
Advantages of the IVA Legal Framework
- Debt Relief: Provides a clear path to resolve unsecured debt.
- Legal Protection: Shields you from creditor harassment and legal actions.
- Structured Payments: Ensures repayments are affordable and based on your financial capacity.
How Our Company Can Help You Navigate the IVA Legal Process
Our company specialises in helping UK citizens apply for IVAs. Here’s what we offer:
- Comprehensive Financial Assessment: We’ll evaluate your eligibility and guide you through the IVA process.
- Expert Proposal Drafting: Our licensed insolvency practitioners will prepare a legally sound IVA proposal tailored to your situation.
- Ongoing Support: We’ll assist you at every step, from creditor negotiations to successful completion of the IVA.
We take the stress out of debt management, ensuring you fully understand your rights and obligations within the IVA legal framework.
FAQs About IVA Legalities
Q: Will all my creditors agree to an IVA?
Not all creditors need to agree individually. If creditors holding 75% of the total debt value approve, the IVA is legally binding on all included creditors.
Q: Can secured debts be included in an IVA?
No, secured debts such as mortgages or car loans are not covered under an IVA. However, arrangements can be made for unsecured portions of these debts.
Q: What happens if I receive a financial windfall during an IVA?
Any significant windfall (e.g., lottery winnings, inheritance) must be reported to your IP and may be used to pay off your debts as part of the IVA agreement.
Final Thoughts
Understanding the legal framework of an IVA is crucial for making informed decisions about your financial future. By knowing your rights and obligations, you can confidently navigate the process and achieve lasting debt relief.
If you’re struggling with debt and want expert guidance on applying for an IVA, our team is here to help. Contact us today to take the first step toward financial freedom.
Contact Us
Our experts specialise in IVA applications and support UK citizens throughout the entire process. Get in touch now for a free consultation and personalised advice.
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