An IVA, or Individual Voluntary Arrangement is a formal, legally-binding way of dealing with your debt. It may be suitable for you if you cannot repay your debts in full but do have some surplus income which you are able to pay to your creditors. An Insolvency Practitioner acts on your behalf and presents a proposal to your creditors. If the proposal is accepted your unsecured creditors are prevented from taking any further action against you, as long as you keep to the terms of the IVA. At the end of the IVA your remaining debts are written off. However, there are a number of important points to consider in deciding whether an IVA is suitable for you. Please read on!
The main criteria in applying for an IVA is that you are insolvent - which means that your debts are greater than your assets or you can't meet your repayments as and when they fall due.
Legally, there is no minimum amount of debt or minimum amount of disposable income. However, the Insolvency Practitioner that we use may be able to help if your debt level is £7,000 or more and you have a monthly disposable income of £70.
The IVA proposal has to be accepted by your creditors. This means that there has to be 75% agreement from creditors to accept the IVA. This is not 75% by number of creditors but by value of your debt. For example, if you owe £20,000, the creditors that are owed at least £15,000 have to vote to accept your proposal.
The Insolvency Practitioner will review your circumstances including the level of debt, the value of your assets and how much disposable income you have. If appropriate, he will present a proposal to your creditors which will identify the level of payments you will make over the 5 years as well as what contributions you are able to make from your assets. Creditors will consider what amount of money they will receive over the 5 years and compare this to the amount of debt that you owe. This is called the "creditor dividend". Your Insolvency Practitioner will also investigate whether you have any assets that can be sold to repay your creditors, for example, shares, savings, boats, caravans, etc.
There is no set minimum dividend that must be achieved, but it may be possible to successfully arrange an IVA with just a 10% dividend. For example, if you owe your creditors £20,000 in total, then they would be looking to receive around £2,000 back over the term of the IVA.
However, the level of the dividend that creditors are prepared to accept will vary in individual cases.
The Insolvency Practitioner will take into account the amount of any equity in your property. He/she will investigate whether you can release this equity, for example, if your partner can buy your share. If so, this amount will be repaid to your creditors. The Insolvency Practitioner may ignore the value of your equity if it is small, for example £5,000 or less.
In the final year of your IVA, you may be required to re-mortgage to release the equity in your property for repayment to creditors. If you can't do this then you may have to continue your IVA payments for a further year.
An IVA usually lasts for 5 years although it could be extended for a further year as mentioned above.
Student loans, fines and maintenance cannot be included in an IVA. Secured debts are not included.
The fees for an IVA are built into the plan. There are 2 types of fees, the nominee fee and the supervisory fee. The nominee fee covers the Insolvency Practitioner's fees in reviewing your circumstances, arranging meetings with your creditors and preparing the proposal. It is taken out of the payments you make into the IVA. If you cancel the IVA before this fee is paid then your creditors won't have received anything and the whole amount will still be outstanding.
The supervisory fee is an ongoing fee deducted from your regular payments. This will vary between Insolvency Practitioners.
As both the nominee and supervisory fees are built into the IVA they are deducted from the money that is repaid to your creditors and are therefore agreed by your creditors before the IVA starts.
No, you cannot apply for further credit whilst you have an IVA in place unless your Insolvency Practitioner agrees.
There may be less of an impact on your job if you have an IVA, than with bankruptcy, for example. However, there are some occupations whereby it may not be appropriate to enter into an IVA because it will restrict your ability to continue in the role. Typically, these will include jobs like accountants, solicitors, directors of a charity, Justice of the Peace, etc. We would always recommend that you check your contract of employment.
You will be required to stick to a strict expenditure regime during the term of the IVA. If you can't keep to the terms of your IVA, your Insolvency Practitioner may be able to get your creditors to alter the repayments. However, if they won't accept revised terms then the IVA mail fail or you may be made bankrupt.
If your IVA is accepted it will be entered onto the Individual Insolvency Register which is held and updated by The Insolvency Service. Your IVA will also be recorded on your credit file for a period of 6 years.
If your income or assets increase during the IVA you must tell the Insolvency Practitioner as part of all of them may have to be paid to your creditors.
If you need further information about IVAs then call us on 0800 1223 037 or you can visit The Insolvency Service website.
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