How an IVA works

IVAs (Individual Voluntary Arrangements) were introduced by the Government in 1986 as an important piece of legislation which allows people with a serious debt problem to avoid the pain and trauma of bankruptcy. Every year over 40,000 people enter into an IVA as a way to resolve their debt situation.

The IVA process is legally binding, but is simpler than bankruptcy and with a less severe outcome. The first step will be for our Insolvency Practitioner (IP) and team to assess your suitability for an IVA and calculate how much you can reasonably afford to pay each month towards your IVA.

We use approved guidelines to calculate what you need in order to pay your household bills and other living expenses – this way we are able to demonstrate to your creditors that the amount you are offering to pay towards your unsecured debts is genuinely all you can afford. You may be required to forego certain luxuries, but our assessment is designed to ensure that you maintain an acceptable standard of living whilst you are in the IVA.

Once you have reviewed the proposed IVA with us, we then submit it to all of your creditors, who will vote on it (this is called the “Meeting of Creditors”, though they rarely physically meet). As long as the majority of your creditors accept your IVA proposal (i.e. those holding at least 75% of the debt) then all your creditors are legally bound by the agreement.

Throughout the term of the IVA (normally 5 years) our Insolvency Practitioner and team will supervise your case and manage the fund into which you pay your IVA contributions (the agreed regular monthly amount). The IP will use the funds to make payments to your creditors (known as “Dividends”) as well as to recover expenses and to cover the IP fees.

We will regularly review the situation with you, and will look to support you throughout the duration of your IVA. A full assessment of your IVA is made each year, with a report sent to you and your creditors.

When your IVA is successfully completed, whatever debt remains is written off by your creditors, leaving you completely debt free.

When is an IVA the right solution?

An IVA could be the right solution for you in the following circumstances:

• You owe more than £15,000 of debts (either yourself or jointly with your partner)
• You owe money to three or more creditors
• You have a regular income and can afford to make regular monthly payments towards your plan (for up to 5 years)
• You cannot meet your contractual commitments to your creditors and have no realistic prospect of being able to fully repay your debts
• You are resident in England, Wales or Northern Ireland

Pros & Cons of an IVA

IVA Pros

IVA Cons

You won’t have to go bankrupt – the social stigma, trauma and financial consequences of bankruptcy are avoided Interest & Charges are frozen by law - if a majority of creditors accept your IVA then all creditors are legally bound to freeze interest & charges, so your debts won’t get bigger An agreed Fixed Term - you will know exactly when you will be debt free (normally 60 months) Debt Write-off – at the end of the Fixed Term any remaining debt is written off Protection & Peace of Mind – you get legal protection from action by your creditors Your career is protected – there are no restrictions on employment (unlike Bankruptcy) Your home is safeguarded – if you own and live in your property then you will not normally be forced to sell it (unlike Bankruptcy)

Your Credit Rating will be affected – you will have a poor credit rating throughout the IVA and for one year after its completion It is a long term commitment – IVAs normally last for five years, and you will need to be committed to making regular monthly payments throughout this period There are consequences to defaulting – if you default on your IVA it can result in bankruptcy Equity release – if you own a home and there is available equity you may have to remortgage in order to make contributions into your IVA (not normally until the 4th year) You may lose some assets – if you own an expensive car, or other valuable assets, you may be required to sell them or trade down in order to contribute towards your IVA

How much will I pay?

The amount you pay each month is based solely on what you can realistically afford. Our Insolvency Practitioner and team will work through your current financial situation with you to identify what you can realistically pay each month towards your debts. We use approved guidelines to calculate what you need in order to pay your household bills and other living expenses – this way we are able to demonstrate to your creditors that what you are offering to pay is genuinely all you can afford.

As you might imagine, IVAs require a lot of administration and for this we will charge a fee. However creditors and IVA providers have agreed an industry-standard scale of charges for setting up and administering the IVA. At Bridgewood we do not charge you directly for setting up your IVA, rather we agree with your creditors to take our fees from the funds paid into the IVA, which would otherwise go to the creditors.

Why choose Bridgewood for your IVA?

At Bridgewood we are passionate about supporting you all the way through your journey to financial freedom. This means, first and foremost, that we give you the best advice we can in identifying the right solution for you.

So before putting you forward for an IVA we will work with you to ensure that you are confident you can make regular monthly contributions for the term of the IVA (usually 5 years). This includes helping you to make the most of your current financial situation, by helping you get the best deals on your utility bills, insurance and banking – that way you will be well set to face the rigours of the IVA term.

Subject to eligibility and acceptance – conditions apply. Your ability to obtain credit will be affected for 6 years. Homeowners may be required to release the equity in their property. Debt write off applies only on successful completion of an IVA. Fees are payable, taken out of your monthly contributions towards your IVA, and will be notified in advance.