Its Purpose?
It
is a legally binding agreement between you and
your creditors (people you owe money to). It helps
those in financial difficulties to make a formal
proposal to settle their debt.
What Are The
Arrangements?
Monthly payments are
based on an affordable disposable income. Once the
final payment is made, any outstanding debt is
legally written off. The arrangement can write off
up to 65% of your debts (subject to your
circumstances).
How does it work?
Debts are settled within a reasonable and
fixed period of time (normally 5 years). Any
interest and debt charges will be frozen and
creditors will be prohibited from demanding
additional payments.
Once a decision has
been made that an Individual Voluntary Arrangement
- IVA is right for you, you will be asked
questions regarding your current financial
situation. Based on the information you have
given, a repayment amount will be agreed with you.
Once proposals have been drawn up you will need to
check and sign these and return them to your Insolvency
Practitioner (IP).
An application may
then be made to the court for an Interim
Order. Once this is in place, no creditors
will be able to take legal action against you. You
may be asked to attend your creditors meeting but
this rarely happens, normally you are asked to be
contactable by phone on the day.
For an
Individual Voluntary Arrangement - IVA to be
approved, creditors will be called upon to vote
either for or against the arrangement. If only one
creditor votes "for" the Individual Voluntary
Arrangement - IVA, the Individual Voluntary
Arrangement - IVA will be approved. However, if
only one creditor votes against the Individual
Voluntary Arrangement - IVA and they represent
less than 25% of your total debt, the meeting will
be suspended for a later date and other creditors
who did not vote will be called upon for their
vote.
If the required numbers of creditors vote in favour of the Individual Voluntary Arrangement - IVA, the proposal will be approved and become legally binding. As long as you keep
up the repayments, when the term of your agreement
is finished, you will be free from these debts
regardless of how much has been paid off.
During the period of your arrangement your
financial situation will be reviewed regularly to
see if there has been any change in your
circumstances.
It is very important that
consumers do not confuse an Individual Voluntary
Arrangement - IVA with a Debt Management Plan,
which are not legally binding.
Most
Individual Voluntary Arrangement - IVA cases are
based around one, affordable, monthly, payment,
over a period of 60 months. This one affordable
payment is based on your earnings minus your
expenses.
An Individual Voluntary
Arrangement - IVA proposal has to be prepared by a
licensed Insolvency Practitioner (IP) who then
presents it to creditors at a creditors meeting.
What Are The Hidden Problems with DMP?
Why use an IVA?
Besides overcoming the problems
outlined in Why avoid other Debt Solutions? An IVA
offers a real solution, a “Light at the end of the
Tunnel”, where informal debt solutions as
described above do not.