An IVA is more than a payment plan. It is a formal, legally binding agreement under the Insolvency Act 1986. Here is what that agreement actually contains, and what you are signing up to.
An IVA agreement is a contract between you and the people you owe money to, drawn up and overseen by a licensed Insolvency Practitioner. In it, you propose to pay back what you can realistically afford over a set period, and your creditors agree to accept that in place of chasing the full balance.
It only comes into force once creditors representing at least 75% by value of the debt that votes agree to it. From that point it is binding on every creditor included, even any who voted against, and on you.
Your proposal is the heart of the agreement. It typically covers how much you will pay each month, how long for (usually five to six years), the fees the Insolvency Practitioner will charge, how your creditors will be repaid, and the standard terms and conditions that govern things like annual reviews, windfalls and what happens if you miss payments.
Many straightforward consumer IVAs follow the IVA Protocol, a standard framework with agreed terms and a plain-English factsheet, designed to make the paperwork easier to understand. You should always read the proposal and the key facts alongside it before you agree.
By signing, you agree to make your payments, cooperate with annual reviews, tell your Insolvency Practitioner if your income changes, hand over most windfalls such as an inheritance, and, if you are a homeowner, potentially release some equity near the end. In return, interest and charges on the included debts are normally frozen and those creditors stop contacting you.
It is a serious, binding commitment, not something to enter lightly. If the figures or the terms are not ones you can live with for several years, it is far better to find that out before you sign than after.
An advisor can explain exactly what you would be signing and check an IVA is right for you, with no obligation. Or picture the numbers first with the IVA calculator.
You never have to pay anyone to understand your options. These services are free, independent and will go through every route with you.