What is an IVA? You have debts; you can’t afford to make the agreed iva payments on your debts; you would like to reach an agreement with your creditors to repay what you can afford; you have regular income; you may or may not have assets such as a house; you would like the agreement with your creditors to repay some of your debts and to have the rest written off in a reasonable time period and you would like the agreement to be binding on your creditors as well as on yourself of course.
An IVA is a formal agreement between you and your creditors to repay a portion of your debt over a limited period – usually five years, but it can be for a shorter period too. It is also binding on all parties. At the end of the IVA, provided you have adhered to the agreed terms, all your debts are discharged and any remaining debts are written off. What could be simpler? Well, lets answer some of the obvious questions that arise.
Frequently asked IVA Questions
- Must I include all my debts? With the exception of secured debts such as your mortgage or your car HP, all other unsecured debts must be included in your proposal for an IVA.
- What are unsecured debts? Credit cards, loans, current accounts, store cards, borrowings from friends or family, arrears on utility bills such as telephone, gas or electricity, self assessment tax arrears and arrears on council tax or water charges are all examples of unsecured debts.
- Must all my creditors agree to accept my IVA proposal? No. All your unsecured creditors have the right to vote on your proposal but in practice not all creditors exercise this right. Of those who do, more than 75% of your unsecured creditors, as measured by the value of your debts to them, must accept your proposal for an IVA to come into being.
- What about creditors who do not vote? They are still bound by the decision taken by the creditors who did vote. For example, if you had debts to four creditors of say £20,000, £15,000, £8,000 and £1,000 and only the £1,000 creditor voted then the other three big creditors would still be bound by the decision of the smallest creditor, which hopefully would be acceptance of your proposal.
- What about the IVA being binding? All accepted IVA’s are registered with the government and the main legislation governing the formation and conduct of IVA’s is governed by the Insolvency Act (1986).
- How much will I have to pay? Only what you can afford. An income and expenditure statement will need to be prepared and your monthly payment will usually be the difference between your income (what you earn and any pensions and benefits) and your expenditure (your living expenses of your dependents such as your family).
- How long will I have to make these monthly payments? The usual duration for an IVA is five years or 60 months. However, it can be shorter than that if for example additional funds should become available. For example, if you should re-mortgage your house, with the prior agreement of your unsecured creditors, thereby releasing an equity lump sum; you can contribute some or all of this lump sum to your IVA, creditors could agree to reduce the duration of the IVA, enabling you to be debt free in a shorter period of time.
- What about my mortgage or car HP payments? You can continue to pay these directly to your secured creditors and they are alllowable expense items on your income and expenditure statement.
- What about the costs I would incur in an IVA? All the costs are taken from the monthly payments you make into your IVA. You have to pay nothing more yourself.
- Can I get an estimate of these costs? Not just an estimate. A good IVA provider will include a summary of the costs of the IVA in the proposal itself and these will usually be fixed over the duration of the IVA. So, you will know upfront what the costs of the process will be over the full duration.
- Where can I get advice on IVAs and what will it cost me? All of our approved IVAs are administered by licensed Insolvency Practitioners. We charge no fees and receive no income until your IVA is accepted by your creditors and even then, our fees come out of your monthly agreed creditor payments.If your creditors do not accept your IVA, we receive no fees whatsoever.
- What other options do I have? The main alternative options usually considered by people with personal financial problems are to obtain a consolidation loan or to enter a debt management plan or to go Bankrupt. It may even be that with a little advice, we could show you how to manage your financial problems a little differently then you may not be insolvent at all and you could manage your own financial affairs yourself.
- How can I get advice on all of my options? The first thing you should do is contact us. Upon contacting us, we will help and advise and advise you as to what is best for your individual circumstances. You will need to provide us with full details of your financial circumstances (your information will NEVER be passed on to a third party) and following your consultation you will have a much clearer idea of what you can do next. We only offer the best debt advice for your circumstances and you do not have to commit to anything with us.
There are several thousand UK residents who become overwhelmed by debt each year and one of the biggest contributing factors in this is the use of credit cards, store cards and similar forms of credit. Unfortunately in this age we are all people who have to live on credit because it feels like the most basic standard of living requires us to spend more than we have at our immediate disposal. Sometimes trying to pay back that credit gets to be too much if the size of the debt is allowed to escalate too far.
If you can catch the situation early enough before it becomes too serious, a debt management plan can provide the answer to getting you back in the black. Unfortunately many people do not catch it in time and the situation gets to the point where it is simply impossible to repay the debts you have out of your available income within a reasonable timeframe. Before giving up completely and filing for bankruptcy you should try an individual voluntary arrangement (or IVA), as this allows you to write off a large part of your debts and just repay a portion of them.
What is an Individual Voluntary Arrangement UK?
A UK IVA is a legal, binding agreement between your creditors and you, where you agree to pay them a proportion of what you owe them by making regular payments based on what you can afford. You usually have to make the regular payments for a period of five years and after that any remaining debts are written off and you are free from debt again.
Only a licensed professional can set up this arrangement, which means you will need to contact a UK debt management company that will set up the voluntary arrangement for you. As part of this process they will appoint an insolvency practitioner to help you.
The insolvency practitioner will ask you questions about your financial situation. It is important that you give him all the information that is requested. The information is then used to apply for an Interim Order. A meeting will have to be held in which the creditors will vote on the arrangement. Creditors representing at least 75% of the monetary value of your debts have to agree to the individual voluntary arrangement for it to be put into force. If you get that agreement, any creditors who do not agree are also bound by it. Since it is legally binding once it does pass the creditors must stick to the arrangement and neither they nor you can easily change their minds.
Who Should Apply For an IVA?
An individual voluntary arrangement is not right for everyone. Some people can better benefit from a debt management plan if they are not deeply in debt. This particular type of arrangement is only available to UK residents. You may want to apply for a voluntary arrangement if:
You have a steady income but have become overcome with debt.
You do not want to lose your property like you would in a bankruptcy.
You do not want to lose your particular employment position by filing bankruptcy.
You owe more than £15,000 to several different creditors.
An individual voluntary arrangement does not have such a negative impact on your credit as bankruptcy does. It may not be as serious as bankruptcy since you are making payments to you creditors, but it will stay on your credit report for the duration of the payment period.