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.
How does it work?
Debts are settled within a reasonable and
fixed period of time (normally 5 - 6 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 creditor who voted against
the Individual Voluntary Arrangement - IVA
represents more than 25% of the total debt you owe
the Individual Voluntary Arrangement - IVA will
fail. This is because an Individual Voluntary
Arrangement - IVA will only ever be approved if
75% in monetary value is voted for. If any of the
creditors don't vote, it is assumed that they will
vote FOR the Individual Voluntary Arrangement -
IVA.
The Individual Voluntary Arrangement
- IVA will be legally binding. As long as you keep
up the repayments, when the term of your agreement
is finished, you will be 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?
What are the costs of an IVA?
Typically once enough monthly payments have been made after the arrangement has been approved, a fee of £1,500-2,500 + VAT will be drawn for the initial work in preparing and circulating the proposal and holding the creditors' meeting depending on the complexity of the case. Then once per year an annual supervision charge of typically 15% + VAT of all realisations going in to the IVA. The annual charge covers the cost of monitoring the monthly payments, general correspondence, and sending a report and dividend to the creditors once per year. Where two partners propose two IVAs in respect of joint household debts the initial cost is likely to be £3,000 + VAT with again the annual cost being set at 15% of realisations.
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.
Will I be able to get a mortgage or further loans/finance/effect on credit rating?
This will greatly depend on your credit status, which will be adversely affected by your participation in any IVA. The affect on your credit rating will last for 6 years.
What is the effect of IVA failure or an IVA failing?
We receive a lot of calls and emails from the public asking; "What is the effect of IVA failure or an IVA failing?".
If the IVA falls so much into arrears that nothing can be done to bring it back on track then the IVA Supervisor will have no choice but to issue a Notice of Termination. This will formally bring an end to the IVA.
If the IVA fails then the Creditors will be able to chase you for the remaining debt, as you will no longer have the protection afforded to you by the IVA.
There is also the risk that Creditors or the Insolvency Practitioner could petition for your Bankruptcy.
Easierdebt is licensed under the Consumer Credit Act. License Number 598479.
Easierdebt is a trading style of Loan Management Services Limited.
Registered in England & Wales.
Company Number 4571036