IVA (Not available in Scotland)
IVA’s are Individual Voluntary Arrangements. These are contractual and legal arrangements between a debtor and their creditors to repay their debts at a reduced rate and generally over a reduced period. For some people IVA’s do offer a quicker and more definite route to clearing debt than a debt management plan.
To qualify for an IVA the debtor must be “insolvent”. This typically means that the debtor’s unsecured debts outweigh their assets (often equity held in their home) and also that they are unable to repay their debts when they fall due for repayment.
An IVA is often used as an alternative to bankruptcy. It can help to protect assets (such as a home), avoid the publicity which may in some instances be connected with bankruptcy, and often enables a better return for creditors.
To qualify for an IVA you will generally need more than £7,000 of unsecured debts and might need to be in a position to repay £70 per month or more towards the debts for the duration of the IVA (which is typically five years). These figures are guidelines, every case is different and different providers have different acceptance criteria. The site support team are available to discuss your case should you wish to; an IVA may be possible in certain circumstances even if the above criteria are not met.
Some people are able to contribute lump-sums into an IVA. This might be from the sale of an asset or a contribution from a family-member or friend. In these cases a different type of IVA might be possible whereby the lump sum is an alternative to making contributions over a period of years.
If you have assets they will be taken into account in an IVA. For example if there is equity in your home you are likely to be required to release some equity during the IVA (for example by re-mortgaging) to assist in repaying your creditors.
You will need to secure the services of a Licenced Insolvency Practitioner to work with you on your IVA proposal. It is their job to work with you to establish a reasonable level of repayment to creditors and to gain the agreement of your creditors to the arrangement.
If 75% of your creditors agree to the proposal put forward (or do not object to it) the IVA will be binding on all creditors. This provides you with protection against any further recovery activity on the included debts.
Provided you meet the commitments made in your successful IVA proposal you will no longer be responsible for any remaining debt at the end of the agreed IVA term (after you have been provided with a “certificate of completion”. This only applies to the unsecured debts that formed part of your IVA.
Your insolvency practitioner is likely to make payments periodically to your creditors during your IVA, in accordance with the terms of the arrangement and when funds are available to be distributed.
Avoidance of bankruptcy, protecting a home, and a largely defined repayment period are all major advantages of IVA’s.
The selection of a good Licenced Insolvency Practitioner is extremely important. Just as with Debt Management Companies the quality of service varies greatly between firms. Should you wish the site support team can guide you towards an Insolvency Practitioner who specialises in cases similar to yours and who has received excellent client and professional feedback in the past.
You may wish to visit IVA Advice Forum. This specialist individual voluntary arrangement forum website can assist you whether you’re looking to begin an IVA or to get answers to your queries about an existing arrangement. The online forum where you can ask such questions there is at: http://www.ivaadviceforum.co.uk/forum/forum.asp?FORUM_ID=1.
Anyone entering into an IVA should carefully clarify with the Licenced Insolvency Practitioner the implications for their house. While it appears a significant amount of your debts may be written off you could find in reality these unsecured debts are partially transferred into secured debt on your home (through an increased mortgage) that could take many extra years to repay.
75% of your creditors (by debt value) must agree to the terms of your IVA for it to be accepted. During the IVA there will be restrictions on your expenditure in order that you are able to contribute what you can reasonably afford to the IVA. The term of an IVA, and therefore these expenditure restrictions, is usually five or six years depending upon your circumstances. Only unsecured debts included within your IVA will have the balances written off at the end of the term.
An IVA will have a very significant effect on a credit record which is likely to be similar to bankruptcy. Any previous IVA may also need to be declared on mortgage applications for many years after an IVA is completed even if it is no longer visible on a credit record. If it is possible to obtain an increased mortgage during an IVA, homeowners may be required to do so in order to release money to help repay their creditors. A mortgage obtained during an IVA is likely to be on less favourable terms than might otherwise be achieved (for example the interest rates may be higher). If a homeowner with equity is unable to re-mortgage during their IVA, the term of the IVA may be extended by one year.
When you cease making payments directly to your creditors your accounts are likely to fall into arrears or further into arrears.
IVAs are recorded on a public register.
Should your IVA fail it may lead to your bankruptcy.
For further details about IVA fees and the work that is conducted Click Here.
Warning: If your IVA fails: As a significant amount of your payments into an IVA are taken first to meet your Insolvency Practitioner’s fees, if your IVA fails you will remain liable for the balance of your debt and any insolvency practitioner fees and costs already incurred.