should you enter into an IVA?

What are Individual Voluntary Arrangements (IVAs)? How do they work? How can you tell if you need one? Which debts can you pay off with them? Does having one mean you’ll lose your ICAEW membership? We answer all of these questions, and more, right here…

The idea of applying for any form of insolvency, such as an Individual Voluntary Arrangement (IVA), can fill you with dread. Especially when there are so many misconceptions out there in relation to IVAs, not to mention the impact they can have on your ICAEW membership. Keep reading for everything you need to know about IVAs, including what they are, how to determine if you need one, how they work and more.  

what is an IVA? 

An IVA is a formal arrangement between you and your creditors that sets out how you are going to pay off your unsecured consumer debt. They tend to last for five years, and if you have equity in your property, you usually have to release it in the final year of your IVA. At the end of the IVA, the remaining debt is then written off. 

IVAs are managed by insolvency practitioners. Make sure you do your research when selecting one, don’t just choose the first one you happen to come across. For more on finding an insolvency practitioner, take a look at this guide from Debt Camel.  

which debts can you pay off with an IVA? 

You can use an IVA to help pay off many common debts, including: 

  • overdrafts 
  • personal loans 
  • catalogue debts 
  • council Tax arrears 
  • hire purchase debts 
  • mortgage shortfalls 
  • credit and store cards 
  • money you owe to HMRC, such as Income Tax or National Insurance contributions 

which debts can’t you pay off with an IVA? 

You can’t use an IVA to pay off: 

  • student loans 
  • magistrates’ court fines 
  • certain types of car finance 
  • child maintenance or Child Support arrears 
  • social Fund loans 
  • TV Licence arrears 
  • mortgage and rent arrears 

Are you considering putting your mortgage and rent arrears and other secured loans against your property? IVA terms state you must ask your creditors for their permission. In most instances, they don’t agree to this action. 

Check with our debt adviser to see what you can and can’t include in an IVA. If you have mortgage or rent arrears, see if there are other debt solutions available to you to deal with these repayments. 

is an IVA the right option?  

In order to enter into an IVA, you need to be able to pay your creditors every month. If you are currently out of work or retired, an IVA won’t work for you. 

If you are self-employed and run your own accountancy practice, you may be concerned about fluctuating income levels and not being able to make payments outside of the busy tax season. However, it is possible to make flexible payments. 

In some cases, bankruptcy can be the preferred option over an IVA, especially if you’ve retired. Bankruptcies cannot fail and usually only last for a year - so if you would like a fresh start, it may be the best option for you. 

However, if you have any assets you’d like to protect, such as a property, an IVA is the preferred option. 

You may also want to consider a Debt Management Plan (DMP). They’re similar to IVAs, due to the fact you make monthly payments to your creditors, but they aren’t a formalised agreement. They don’t have a fixed payment end date and there’s no guarantee of no interest being added. However, DMPs are more of a flexible option and have less impact on your credit score. They aren’t added to the Insolvency Register either. 

how do you set up an IVA? 

You have to get an insolvency practitioner to do it for you. This may involve having to pay some upfront charges. You will also be expected to agree on a monthly payment schedule, which will include your insolvency practitioner’s fees. 

If you think an IVA is the best option for you and want to set one up, get some expert help and guidance first to make sure you are making the best decision. If you contact a free debt advice service, such as our free debt advice service, they will be able to recommend an IVA provider and help you understand the various different fees and charges. 

how do IVAs impact ICAEW memberships? 

The main difference between an IVA and bankruptcy is that having an IVA doesn’t mean you automatically lose your ICAEW membership. However, entering into an IVA does mean you are liable to disciplinary action, which has to be reported to the ICAEW. 

The ICAEW's investigation committee will investigate the matter and monitor your arrangement. Providing there are no aggravating features, such as refusing to co-operate or fraudulent activity, it’s unlikely that having an IVA will lead to you losing your membership. The ICAEW will ask you to cover the costs of their investigation, but they may agree to defer payment of the costs until your IVA has been completed. 

In comparison, a DMP could potentially lead to disciplinary action, but it won’t automatically get reviewed by the investigation committee. (To find out more about the impact of debt on your ICAEW membership read, ‘How debt affects your ICAEW membership: Q&A.’) 

how we can help  

Our free debt advice service is available for past and present ICAEW members, ACA students, past and present ICAEW staff and their close families. 

All of our services are free, impartial and strictly confidential. If you're experiencing financial issues that you need help with sorting, get in touch with our dedicated debt advice team for impartial, professional advice today.

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Who is eligible for support?

We support past and present members of the Institute of Chartered Accountants of England and Wales (ICAEW)1, ACA students2, ICAEW staff members3, and the family and carers of members and students4

  1. No matter where your career takes you, past and present members of the Institute of Chartered Accountants of England Wales (ICAEW) are eligible for caba’s services for life, even if you change your career and leave accountancy 
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