Process for IVA
Individual Voluntary Arrangement was introduced by the government in 1986 as an alternative to forbearance. It is a legal agreement that lasts for 5 years between you and the people to whom you owe money.
Key Features of IVA
1- A lot of information has been written about IVAs and it is important to know that it is not all suitable. Like other lending institutions in the (UK), we will only suggest the IVAs option that is right for your circumstances. We will also let you know. What happens when an IVAs fails so you know what it means to take an IVAs.
2- An IVAs will reduce the amount that you pay back to your creditor. This may not be 90%. What actually happens is that an IVAs advisor helps you and your creditor arrive at an idea of how to live. How much money you can pay each month after taking into account the costs, how much or how much debt you can put into the account depends on your circumstances.
3- An IVAs can be very effective for some people. In fact, an IVAs will only write off between 50% and 60% of an average loan of less than £60,000, thus a highway would mean an amount between £25,000 and £30,000. Shortage.
4- Interest and fees will also be withheld on any loans covered in an IVAs. You won’t have to sell your home as part of the agreement and your creditors can’t take any further action against you.
5- You will agree to receive a fee from your monthly payment for the management of the IVAs to your insolvency dealer in.
6- While this rule applies equally to all charities and commercial organizations, it is important to know that companies that charge a part of their fees upfront are at risk of losing money already paid.
7- It’s also important to note that if you make a significant windfall while on your IVAs, like winning the lottery, receiving this PPI compensation and being able to pay off your debt in full as a result, your creditors will ask you to pay the IVAs more than your value. would like to meet the fee.
The Advantage Of an IVA:-
* Part of your debt will be written off (50% to 60% typically).
* You can keep your house (although you will have to release any equity to help pay your debts).
* Interest and charges are stopped on any debts included in the arrangement.
* Your creditors are legally prohibited from taking any further enforcement action such as petitioning for your Bankruptcy.
* By repaying what you can, you emerge after five years with your finances back on track.
The disadvantages Of an IVA:-
* You must keep up payments for five years or risk Bankruptcy (any fees you’ve paid up to that point will not be recoverable).
* You must release any equity in your house to help repay debts.
* The payments you make can go up if your income increases or if your expenditure reduces during the five years.
* The IVAs will affect your credit rating for a period of six years from the date the IVAs begins (whilst most people will take the view that resolving an existing debt problem is more important than their ability to take on additional debt over the next six years, it’s still important that anyone considering entering into an IVAs is fully aware of the consequences).
How does the IVA process work?
The IVA process can be broken down into six stages. It usually takes about six weeks from start to finish, although this often depends on how quickly you can send the necessary supporting evidence to your advisor. Make sure an IVA is the most appropriate solution for your financial circumstances by speaking to an impartial advisor. The advisor should examine your income, expenditure, assets and debts in detail in order to calculate how much you can realistically afford to offer your creditors each month (see how much will I have to pay into my IVA) and determine whether your creditors are likely to approve your IVA (see who can enter into an IVA). The advisor should also explain all of your other options to you, such as Bankruptcy, at this point. If an IVA is appropriate for your circumstances then a Statement of Affairs is drafted based on the information you’ve already provided. The Statement of Affairs is the consolidated view of your current financial circumstances (assets and liabilities) and forms the basis of your IVA proposal. The proposal (which is usually drawn up by an Insolvency Practitioner acting as Nominee) will also contain creditor details as well as a breakdown of your income and expenditure and any supporting evidence that you may be required to provide (pay slips, bank statements etc). At this stage, your Nominee may also apply for an Interim Order, which is a legal injunction preventing your creditors from taking further action against you until your IVA proposal has been considered. Assuming that you’re happy with the proposal, it is then distributed to your creditors as well as the local county court and the Insolvency Service. The proposal document contains a proposed date (not earlier than 14 days after the distribution of the proposal) on which your IVA application will be considered; this is known as the Meeting of Creditors (in practice, most creditors use voting agents to act on their behalf). Modifications (changes) to your proposal can be requested at the meeting, although in practice this will usually happen in the days and weeks prior to the meeting taking place. If your creditors require more time to consider your proposal or require more information then your meeting can be adjourned. At the meeting, your creditors will vote on whether to accept or reject your proposal. 75% of the votes (by value of debt) must be in favour of the proposal for it to be approved. If this happens, all of your unsecured creditors, whether they voted yes, no or didn’t vote at all, are legally obliged to abide by the terms of the IVA agreement. Once approved, all the relevant parties are informed and a Supervisor is appointed (usually this is the same Insolvency Practitioner that acted as Nominee) to monitor monthly payments and make sure you are abiding by the terms of the IVA. As long as you continue to make payments (see what happens if I don’t keep up payments on my IVA) for the agreed length of time (typically five years), you will be discharged from your legal liabilities on completion of your IVA. You can read more about the IVA process and whether they are suitable for your situation in our IVA section. Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.
What will happen to my house in an IVA?
Unlike with Bankruptcy, where ownership of your home is passed to the Official Receiver or Trustee in Bankruptcy to release any beneficial interest (surplus funds) by whatever means necessary (including by selling your home), one of the main advantages of an IVA is that your house is protected. However, you may be required to release equity (if available) in the final few months of your IVA. Your Insolvency Practitioner will register a restriction over the property (lodged at the land registry) once your IVA is approved, the purpose of which is to protect the equity by letting other interested parties (people looking to secure a loan against the property or people wanting to buy your home) that the property is subject to an IVA. See what are the implications of an IVA remortgage for more information. You can read more about IVAs and whether they are suitable for your situation in our IVA section. Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.
What does an IVA cost?
The IVA cost is covered by your monthly IVA payments and any equity that you agree to release. Essentially, the people you owe money to are agreeing to receive less back from you so that your IP can be paid for their work. Even if your IP decided to charge nothing at all, all it would mean is that your creditors would receive more back; your monthly payment wouldn’t change. Your monthly IVA payment will be calculated by subtracting all of your monthly essential expenditure (travel costs, food, utilities, insurance etc) and priority debt arrears payments (mortgage arrears, Council Tax arrears, court fine arrears etc) from your monthly incomings (wages, benefits, investments etc). You’ll never be asked to pay more than this calculation shows you can afford, no matter how much your monthly contracted repayments are. There are some circumstances that you need to be aware of however, where you may be required to contribute to the IVA fees (see Who pays the IVA fees?). If you receive a large amount of money during your IVA, which means you are able to repay your debts in full or if your IVA fails then you will not be able to recover any fees paid up to that point. You’ll have to stick to the monthly payments that you’ve agreed to for the next five years so you need to be realistic about how much you can live on each month. Be wary of IVA companies that claim they can get your IVA passed by altering your expenditure to unrealistic levels or that charge upfront fees (as you may not be able to recover them if your creditors don’t agree to your IVA proposal). You can read more about IVAs and whether they are suitable for your situation in our IVA section. Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.