How long does an IVA take to arrange and complete?

9 December 2009

For people trying to tackle unmanageable debts, an IVA (Individual Voluntary Arrangement) is one option. It can enable the borrower to repay as much of their debts as they can afford, and have the remaining amount written off.

This is a big commitment that will have a significant impact on your credit rating, but it can still be the most appropriate option for people who cannot afford to repay their debts.

Most IVAs can be proposed within a number of weeks. Your Insolvency Practitioner (IP) will work with you to put together your proposal and can give you an estimation of how long each stage is likely to take. How long the IVA lasts will depend on the terms you agree with your lenders, but in a typical IVA, repayments will be made over a five-year period.

Setting up an IVA: step by step

If your IP has decided that an IVA is the most appropriate way for you to clear your debts, they will work with you to draw up the proposal. This sets out the proposed terms of the IVA, such as how much you`ll be repaying to each lender, and how long you`ll need to keep making payments for.

This proposal will be sent to each of your lenders, who will be given at least 14 days to consider the terms, and will be given the opportunity to `vote` for or against the proposal.

At the end of this period, the `creditors meeting` will take place. Today, this is rarely a face-to-face meeting, but instead a time slot in which you and your IP will make yourselves available to discuss any queries or suggested changes your lenders may have. If your lenders do want any changes to the terms, you can accept these, attempt to negotiate further, or withdraw your IVA proposal.

Once your final proposal has been submitted, 75% (by debt value) of voting lenders must be in favour of the terms for the IVA to go ahead. If this happens, your remaining lenders will be bound by the terms.

What happens if my IVA is accepted?

You will begin making the agreed payments to your IP - usually once a month over a five-year period, although this can vary depending on what is agreed. On successful completion of this period, you will be legally debt-free.

However, there are some things to consider during your IVA. Most of any increase in your income may be required to go towards your IVA, and if you`re a homeowner, you may be required to release some of the equity in your home in the final year of the IVA. Your IP will discuss this further with you.

Also consider that you must be able to commit to regular monthly payments on an IVA - and if you can`t, you may be better off with an alternative debt solution, such as bankruptcy (but consider that this too has its own consequences).

For more information on IVAs and a range of other solutions that could help, click here or call our expert debt advisers on 0800 074 8639.

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