An IVA, or Individual Voluntary Arrangement, is a method available to some individuals who owe money to creditors that they simply cannot afford to repay.
An IVA could be the perfect means for you to make affordable repayments to your creditors and move on with your life. If you feel an IVA might be right for you, get in touch with Personal Debt Solutions free today.
What is an IVA?
An Individual Voluntary Arrangement is a formal personal insolvency procedure that alleviates creditor pressure by setting out a clear and affordable repayment plan that both the debtor and the creditors find acceptable. Once agreed, this will halt any creditor action and allow the debtor to make affordable monthly contributions in order to repay what they can. An IVA must be approved by 75% of creditors by value and will be managed by a licenced and regulated Insolvency Practitioner acting as a Supervisor.
Following payment of the final instalment and providing the terms of the arrangement have been adhered to, the remainder of the debt will be written off and the debtor will be free to carry on unencumbered from their previous liabilities. Typically an IVA will last around 5 years, though this can change depending on various factors.
When to use an Individual Voluntary Arrangement
An IVA is a flexible way of legally managing individual debt and can drastically improve the lives of debtors by removing creditor pressure and allowing them to repay what they can afford over a period of time. Several factors are considered when assessing a debtor’s suitability for an IVA. However, there are 2 primary criteria that an Insolvency Practitioner will look for. Firstly, a debtor should have some form of income that will be able to bear the financial cost of the monthly contributions, in addition to other expenses such as household bills. Secondly, the debtor must owe money to at least 2 creditors, in order for a valid vote to take place and a majority decision to be made. An Insolvency Practitioner will also take into consideration the amount of money owed by the debtor, as IVAs are most effective for total debts exceeding £10,000 or where there are numerous creditors. Other solutions are available for smaller amounts, such as Bankruptcy or a Debt Management Plan or Debt Relief Order.
The benefits of an IVA
- Arranging a Voluntary Arrangement will halt all unsecured creditor action and prevent any further pressure being applied, provided that all terms of the agreement are abided by.
- The use of an IVA prevents creditors who are threatening the use of Bailiff action.
- An IVA will allow repayments to be made based upon what is affordable for the debtor and acceptable for the creditors.
- The debtor will often be able to retain possession of their house and mortgage repayments are factored into the equation when determining affordability, depending upon available equity.
- Any remaining debt at the end of the repayment terms will be legally written off.
- The repayments involved in an IVA will be consistent and regular, allowing for easy budgeting and financial planning.
Considerations when deciding if an IVA is right for you…
- Your credit rating will be negatively affected – there is no avoiding this fact. However, arguably your credit rating may already be affected – this is something for you to consider.
- You may need to try and re-mortgage towards the end of the arrangement if there’s equity in your home.
- Not all debts are included. Payments such as Child Maintenance, Student Loans, fines and secured debts.
- There is no guarantee that your IVA will be accepted by your creditors. However, as experienced Licensed Insolvency Practitioners we do feel that we have a high chance of success.
The costing structure of an IVA.
- What is the Cost of an IVA?
Your advisor will explain the IVA fees which will also be outlined in your IVA proposal.
The fees we charge for drafting and overseeing your IVA are included in the monthly payments into your arrangement.
- What is the Cost of an IVA? : Nominee’s Fee
The Nominee’s fee covers the expertise required to review your income and expenditure, assets and liabilities which are needed to produce the IVA proposal that will be presented to your creditors.
The Nominee’s fee can differ and will be taken from your monthly payments, usually for the first six months. If your proposal is accepted your Nominee then becomes your Supervisor.
- What is the Cost of an IVA? : Supervisor’s Fee
On the approval of the IVA, a Supervisor’s fee is taken on a monthly basis. This covers the specialist work throughout the IVA process (usually a period of five years) which ensures it is carried out correctly. Your account will be managed routinely by a case Administrator. Additionally, your Supervisor will conduct reviews periodically throughout the span of your IVA ensuring that payments are still achievable and to oversee any variations.
The IVA procedure
- Make contact with a Personal Debt Solutions consultant.
If you believe an Individual Voluntary Arrangement might be right for you, or you want to find out more about the options available to you, then the first step towards becoming debt free is to contact an experienced financial advisor here at Personal Debt Solutions. Our advisors will be able to analyse the situation, provide you with your options and offer you some free advice, which you can take and act upon if you so wish.
- Discuss the options
Should it become apparent that an IVA is indeed the best way forward and you decide that you wish to take the next step, then you may be referred to one of our specialists who will thoroughly assess your eligibility and get the process started.
- Preparation of the IVA
At this stage, your experienced voluntary arrangement specialist will assist you in collating the information required in order to present the proposal to your creditors. Such information may include:
- The name and contact details of all of your creditors, including how much you owe them.
- Information regarding your total monthly expenditure and income.
- Additional details that help to give a better understanding of your financial situation, such as details of your assets etc.
This information will help your IVA specialist work out your affordability and put together a repayment plan that works for you and your creditors.
- IVA presentation and creditor vote
Once the proposal has been put together, copies of it will be sent to all of your creditors and a meeting will be held in order for a vote to be taken. This vote will require at least 75% by value of all voting creditors to be in favour in order for the IVA to be accepted and to proceed. If the creditors refuse to accept your IVA proposal however, alternative solutions exist and your Personal Debt Solutions advisor will be able to assist you further.
- Begin the monthly repayments
If your creditors agree to the IVA proposal, then it becomes a legally binding contract and your monthly repayments will begin. Once your IVA has been confirmed, your creditors will not be allowed to go back on their decision or further pursue you for the monies due, assuming you abide by the terms set out in the proposal.
- The IVA concludes
Your IVA will conclude following the payment of the final instalment, provided that all the terms have been complied with. Any debt included within the IVA arrangement will be legally written off and you will be able to continue with your life free from the burden of your previous liabilities.
What is a joint IVA?
It is not possible to jointly apply for an IVA. They are, after all, called Individual Voluntary Arrangements for a reason! This form of debt management can only apply to one person.
If you have a spouse or partner who is also experiencing financial difficulty, the two of you can apply for separate IVAs but have them linked for administration purposes. This process is known as ‘interlocking IVAs’ where each IVA is dependent on the other.
How to apply for an IVA
If you have come to the conclusion that an IVA is the right solution for you, our team is here to take a detailed look at your finances and help you present an IVA proposal to your creditors.
Our years of experience in providing IVA assistance mean the proposal you put forward will have a very good chance of being accepted by those to whom you owe money.
Frequently asked IVA questions
Will I be able to keep my house?
If at the end of the IVA you have available equity exceeding £5000 per individual where equity is calculated on the basis of 85% loan to value, creditors will expect you to release sufficient equity to either repay in full the costs of your IVA and creditors claims or release the maximum possible.
*While this is common it is not necessarily present in all IVA proposals
Can I keep any windfalls that are due to be paid to me whilst my IVA is in place?
Any windfalls in excess of £500 due to you whilst you are subject to an Individual Voluntary Arrangement must be remitted to your Supervisor for the benefit of creditors. These additional funds will not reduce or replace the contributions payable or release you from your obligations in respect of the Voluntary Arrangement unless the monies paid are sufficient to fully repay the costs of the IVA and creditors’ claims. Windfalls include inheritances, PPI refunds, Compensation monies and any other lump sum payments.
*While this is common it is not necessarily present in all IVA proposals.
Would I be better off in bankruptcy?
That would depend on your own individual financial circumstances and you should consider this carefully before committing to a Voluntary Arrangement.
What if my circumstances change whilst I am in an IVA?
Debtors Proposal includes a Clause which enables you to revert to your creditors to put forward a Variation to the Proposal if the Supervisor considers that it is appropriate. In order for such a Variation to be approved, 75% in value of the creditors who vote must vote to accept the proposed variation. Therefore the Supervisor is not able to guarantee any change to the terms of your Proposal, but we would always work with you and your creditors to try and put forward an amendment that is agreeable to all parties.
What happens if my IVA fails?
Your IVA is a binding legal process and if you do not comply with the terms of the Arrangement your Supervisor may fail the Arrangement and petition for your bankruptcy. It is therefore important that you maintain communication with your Supervisor throughout the IVA so that we can work together to ensure its successful completion. If you do not feel able to commit to your obligations under the IVA for the duration of the Arrangement, you should seriously consider if an IVA is appropriate for you.
Personal Debt Solutions are a firm of Licenced Insolvency Practitioners with years of experience dealing with individuals in debt. Get in touch today for free, tailored advice.