Insolvency is a losing proposition for both debtors and creditors. Creditors often take huge losses when debtors go into bankruptcy, and the debtor is left with a disabling black mark on their credit record. However, the IVA, or individual voluntary arrangement,

provides an alternative that yields benefits for both parties. Before deciding on either of these options, however, you should know what to expect if you fall into insolvency as well as what to do once you emerge from it.

Overview of the IVA Process

If you're considering an IVA, the first thing you will need to do is seek the aid of a debt service organisation. These organisations specialise in helping individuals come to terms with their debt and identify the best option for their particular situation. If the debt service organisation identifies you as a good candidate for an IVA, they will put you in touch with a registered insolvency practitioner who will begin the process on your behalf. IVAs typically last for around five years, during which time you must make your monthly payment without fail. In exchange, your creditors will cease any collection efforts. They are also barred from applying additional interest to your debt.

Insolvency Practitioner

At the start of the process, your IP will assess your debt and identify all of your creditors, as well as determine the maximum monthly payment that you can comfortably make. After that, the IP will negotiate with your creditors to determine how much you will have to pay and for how long. However, it is important to realise that your creditors are not required to allow you to enter into an IVA. Your IP will present the proposal to them, at which point they vote. The proposal must receive 75 percent of the votes or it will fail.

If the vote passes, your IP becomes supervisor of the IVA. It is their responsibility to receive your monthly payment and distribute it among your creditors. The IP will also deduct their own monthly fee from your payment. For this reason, it is crucial that you don't default on the IVA. If you do, you may find that you've mostly paid for the services of the IP and that you're left with much of the same debt you started with.

Consequences of Insolvency

While you are not strictly forbidden to seek credit while you have an IVA, your IP has the power to limit your credit options. Specifically, it is common practice that your IP request that you destroy any active credit or store cards. This step is necessary to ensure that you don't accrue any additional debt. You can still use prepaid credit cards, and in fact, doing so is a prudent way to get a head start on reestablishing your credit.

Note, however, that your assets will most likely be frozen for the duration of the IVA. This includes your home, your car and any other form of secured debt. Also note that if you have equity in your home or car, you may be required to release it to the IP so that they can distribute it to your creditors. While this is never ideal, it can lessen the life of the IP so that you can become debt free sooner.

Unlike in the case of bankruptcy, you will not be required to surrender any newly-acquired assets to your IP assuming that you have not defaulted on your IVA. You also are not restricted from managing a business, nor are you subject to court-ordered purchase reversals. However, you should note that because an IVA is a form of insolvency, your name, address and date of birth will be added to the Individual Insolvency Register. You will be removed from the register three months after your IVA is resolved.


Once you've fully resolved your IVA, your IP will provide you with a Certificate of Completion. You should immediately send this certificate to all three of the major credit bureaus: Experian, Equifax and Callcredit. They will then update your records. This process should happen automatically, but sending the certificate yourself will speed things along. You should also obtain your credit report from each of the bureaus and check them thoroughly for accuracy. This step can help you tremendously in reestablishing your credit history. Note that your IVA stays in your credit history for six years. For instance, if you have the standard IVA term of five years, your credit history will reflect it for one additional year. During this year, you will find it difficult to obtain credit.

For readers wanting more info about bankruptcy and IVAs Sam Jones the author of this article suggests readers go to the following advice and help pages (