IVA individual voluntary arrangement

If you are reading this then I assume you are considering an IVA, are on an IVA, or in debt and wondering what your options are. I've used the terms IVA, individual voluntary arrangement, and individual voluntary agreement in this hub. Its legal name is individual voluntary arrangement so I changed the hub title but it is a legal arrangement that you are in agreement with so "IVAnna" make that clear.

This is my personal account of what it's like to be just in the process of setting up an IVA and what its implications are for the future. There's plenty of sound legal advice online and on offer from financial solution companies but it would have helped me if I had been able to speak to someone that had personal knowledge of having gone through it all and survived! So here goes...

The picture I chose for this hub may seem obscure but it is just my little dig at the con-dem-nations savage cuts and them taking from the poor to give to the rich as if they think they are Robin Hood in a parallel universe. I don't blame them entirely though as I still shout at the television or my computer screen whenever I see Gordon Brown doing his famous little 'no more return to boom and bust' speech.

Under new labour I boomed. I qualified as a psychiatric nurse, got a mortgage, got married, and had enough disposable income to be able to indulge in luxuries such as a hot tub for my back garden and a new car. Even after my wife and I split up in 2006 the boom was still very much alive and I was able to take out a loan and a credit card to bridge the gap between two incomes and by then being single plus divorced.

The bust kicked in for me in 2008. As a transsexual woman just starting on hormones as part of my gender transition, my body's bust size grew exponentially as did the level of just how financially bust the western world was becoming. Credit dried up from high street lenders, credit card offers for ridiculous APR amounts flooded through my door, and eventually I ended up having to turn to pay day loan companies resulting in an inescapable spiral of using my wages to pay off one pay day loan just to be able to take out another one as soon as possible.

Eventually this was all going to go Pete Tong as it inevitably did earlier this year when I discovered that even pay day loan companies wouldn't pay out to me, my credit score was poor, and so in stepped the insolvency practitioner.

Having been raised in an upper middle class family and having a brother and sister who both have good jobs, a partner who also works, and no financial concerns of note it was never going to be easy to have to hold my hands up and say 'the pink sheep of the family is on the verge of bankruptcy'. But having sat down with my parents to do that recently, it actually wasn't as bad as I thought it was going to be.

Family were obviously shocked and my mum was 'disappointed with me' feeling that I was stupid for getting in to debt. My dads opinion was more of the school of thought that I was daft but the credit companies that gave me the cash in the first place were more stupid and irresponsible than me. So having discussed my options with my parents we decided that an IVA (individual voluntary agreement) was the best course of action.

My first port of call was the citizens advice bureau and from there given a list of financial solution companies in my area that I could contact for further information. It's a fairly straight forward process and from initial contact to the IVA being in place takes 4-6 weeks but from the moment your 'insolvency practitioner' has details of your debts (companies you owe credit to, statements, account balances etc) the interest rates are frozen and you don't have to stress about letters for final demands, court action, or bailiff visits.

Initially the financial solutions company will go through details of your income, expenditure, and debts over the phone then offer you a range of solutions. I was offered an IVA, bankruptcy, and a couple of other more risky options but with the implications for my home and bank accounts if I went bankrupt, IVA was the only way forward for me.

Having made this decision they agree an IVA set up with you based on what you can afford to pay without leaving you short for the month and they will give you a list of documents that you will need to provide them with in order to set up the IVA which in my case were collected by a courier. The documents are - Annual mortgage statement, 3 months worth of statements for any bank accounts you hold, 3 months of wage slips, most recent statement from each company you owe money to, 2 recent utility bills, driving license or passport to prove identity, and the completed IVA form that the company send to you by recorded delivery.

They then liaise with those companies (the creditors) on your behalf and arrange a meeting with representatives from all of your creditors to agree the terms of the IVA. If 75% of your creditors agree to the IVA then it is signed sealed and delivered plus legally binding from that moment on.

It means that after an initial set up fee (in my case £300) your financial solutions company/insolvency practitioner do all the work on your behalf and liaise with your creditors to agree a reasonable schedule of monthly repayments usually over 5 years. The deal is that you keep up with your monthly payments (which are set at a reasonable amount that you can afford based on income and outgoings) and you don't have to worry about losing your home plus in exchange your creditors get about 70% of their money back that you owed to them.

In those 5 years it is part of the IVA that you are not allowed to take out any more credit and at the end of the IVA you will be asked to re-mortgage your home to release equity to pay off any outstanding money owed to the creditors. The IVA stays on your credit file for 6 years in total (one year more after the IVA payments have finished) and it may be tricky to get credit again in the future but trust me after going through all this I don't think anyone in their right mind would want to take out more credit!

So for example...

My house has 16k equity in it.

My unsecured debts (excluding mortgage) are 20K.

I pay £300 as a one off IVA set up fee and after that £200 a month for 5 years.

I pay £12,000 in debt repayment plus at the end of the IVA may be asked to re-mortgage to release a sum of equity (agreed by the creditors at the start of your IVA) to pay off a bit more. Then the IVA is done and dusted, I've clung on to my home by the skin of my teeth, and I become one of those annoying ex spendaholics that tell people of the dangers of obtaining credit. SIMPLES!

It's a pretty daunting decision to have to make and not all IVA's are agreed due to the level of debt being too high or creditors not agreeing to the terms and conditions. However, having made the decision it feels like a massive weight has been lifted off my shoulders and I'm not having to worry about opening my post or answering my front door any more. Money will be tight for me for the next 5 years and I'll have to cut out luxuries plus pay cash rather than relying on the 'never never' but I'll get through it and still play lotto in the hope of a big win (which annoyingly has to be disclosed and used to pay off debts while you are on the IVA!)

I hope this helps some people and good luck with whichever course of action you end up taking. In the spirit of scrimping and saving I'm off to the pub for £1 a pint happy hour.