IVA Frequently Asked Questions (FAQ)
Why Use an IVA?
An Individual Voluntary Arrangement ( IVA ) is an agreement with your creditors to make a single reduced payment each month. This lasts for an agreed period of time normally 5 years. Once agreed, creditors are not allowed to add interest or charges to your accounts by law. The agreement is fixed meaning that creditors cannot randomly demand changes to it.
Only an Insolvency Practitioner (IP) can put an IVA together. We will need to ask you a number of questions about your financial situation in order to calculate how much you can realistically pay your creditors each month. This is based on what you can afford, not what creditors are asking for.
Once proposals for repayment have been drawn up, an Interim Order is applied for. Whilst the Interim Order is in place, your creditors cannot take action against you without asking the Court.
A meeting date will be arranged and full proposals sent to all creditors who will then have the opportunity to vote on them. If enough of your creditors (75% in value) agree, the IVA will become legally binding. You then make agreed payments for a number of years normally 5 and providing you have completed your Arrangement as agreed and once the final payment is made, your liabilities to your creditors are discharged in full. Many Insolvency Practitioners will normally charge you an upfront fee for putting together the Arrangement. WE DON'T
Our practitioners work within the guidelines of R3 and as part of the Association of Business Recovery Professionals.
Can an IVA be settled early?
Yes, we can convene a variation meeting to offer a sum of money in full and final settlement of your obligations under the IVA. The sum of money could be raised by:
- Remortgaging your property
- Funds from a relative
- Cash in policies (Subject to getting you expert investment advice)
A great number of IVAs end early with the introduction of a lump sum of money. Creditors do support early settlements as they generally prefer to receive their money early than wait for payments over a five year period.
Can I protect my home?
Outside of an IVA, creditors can obtain judgements and then go onto obtaining charging orders against your property. They can also petition for your bankruptcy which will mean that your property is at risk. An Interim order application can stop these actions in the period prior to the creditors' meeting. Once your IVA has been approved, creditors cannot take any further action against you.
An IVA covers all unsecured debts
Whether your debts relate to amounts due on loans, credit cards, trading debts such as Self Assessment or Tax, amounts due to suppliers as well as council tax and utilities, an IVA will bind all these creditors to your one monthly payment arrangement.
If you have equity* in your home then you will likely be expected to remortgage towards the end of your IVA to release the funds to your creditors as part of the total IVA repayment. If you are unable to release the funds then your IVA may be extended up to a further 12 months to compensate for this.
*Equity is quite simply the available cash in your property; this would be the case if you owed less in total on your mortgage or any secured loans on your property than its current market value. The difference between the two would be the equity in the property.
What are the advantages of an IVA?
- You only make one affordable payment per month.
- As long as you keep to the terms of your IVA, once it is approved, all of your creditors who are entitled to vote are legally bound. They cannot take further action against you or change their minds at a later date.
- From the date of approval, all interest and charges are frozen.
- This is a private agreement between you and your creditors. It IS NOT advertised in the local papers.
- The IVA will not affect your professional status or your ability to hold public office.
What is an example of an IVA?
Mrs. Smith has a total debt of £25,000.00. She has 5 credit cards, 2 loans and an Overdraft with her Bank. She has a car on Hire Purchase (H.P.) which is needed to travel to work and pick up the children from school.
Mrs. Smith pays out £410.00 per month leaving her with a growing overdraft. Her outgoings leave her with no money at the end of the month.
We work out she can pay £220.00 per month for 3 years and £300.00 in years 4 & 5 as the car H.P. ends in 36 months.
Mrs. Smith pays £14,400.00 over 60 months and is now debt free. She keeps the car and still has a Bank account. She is now £300.00 better off per month and has no debt.
Don't be fooled by companies that say they can 'write off' up to 95% of your debt. This is not true. Maximum 'write off' is 75%. The claim of 95% is a one off case and not normal in insolvency.
You can see our IVA Fees on our Important Information Page.
Fast Track Individual Voluntary Arrangements (F.T.V.A.)
If you have been made bankrupt it is still possible to have a form of IVA called a "Fast Track Individual Voluntary Arrangement" which means the bankruptcy order can be annulled. You put forward a payment proposal to your creditors that would mean they will be paid more than they would under your bankruptcy. The Official Receiver runs the F.T.V.A. for you if they agree with your proposal. The F.T.V.A. is cheaper than an ordinary IVA as there are set fees and costs. If it fails then your creditors could try to make you bankrupt again.
Why Not Debt Management?
Although Debt Management may greatly reduce your repayments each month, you will still have to pay all of your debt back. This could take a little longer than the IVA. For example, if you owe £20,000.00 and reduce your monthly repayments to £250.00 based on what you CAN afford to pay, you will be repaying your debt for at least 7 years. You can however change your payments during the plan. Under the IVA, you will be debt free in 5 years or less.
How Do I Apply?
To Be Debt Free in 5 Years or less, call us today on 0800 389 6339 or fill out the 'Call Back' form on this page or Apply Online.
Don't forget, we don't charge an Upfront Fee in an IVA.