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What Exactly Is An IVA?
What is an IVA? – An IVA or Individual Voluntary Arrangement is a formal agreement made between the person in debt and their creditors. The agreement allows the person in debt to make regular monthly payments towards clearing their debt over a fixed amount of time.
All further interest and charges on the outstanding debt are stopped. At the end of the arrangement, any unpaid debt is written off.
What Are The Benefits?
Telephone calls and payment demands stopped
Interest and late payment charges frozen
Single, affordable monthly payment
Protection from court action, creditors and bailiffs
Completely confidential – we respect your privacy!
Debts That Can Be Included
Council Tax Arrears
Car Hire Purchase
IVA stands for Individual voluntary arrangement. An IVA is a legal Voluntary agreement that you can make with your creditors to pay back debts which you are struggling with. It stops your creditors taking further action against you to recover your debts. You make payments towards your debts over a set period of time, an IVA will usually last five years, after which your debts are written off.
Whilst there are no legal maximum or minimum amounts you must owe to get an IVA, usually you must have debt of at least £4,200 to get your creditors to agree to the IVA. You can owe this amount across more than one debt, with more than one creditor.
In addition to setting up the IVA, IVADebtUK will negotiate with your creditors throughout the IVA, meaning that you will no longer have to deal with demands for money or threats from your creditors.
When the IVA has been completed you will be issued with a certificate of completion, it will also be sent to your creditors so they know that the IVA has been completed and the debt to them has been satisfied.
Your Insolvency Practitioner will inform the Department of Trade and Industry and the Court Service that your IVA has been completed. Your credit report will show that you have completed your IVA successfully.
You will receive a statement showing all the transactions that have been made, your payments into the IVA and the dividends paid to your creditors.
An IVA is not free. Legally you cannot set up your own IVA, An insolvency practitioner will be required to set up your IVA.
There are no upfront charges or fees involved setting up an IVA with IVADebtUK. Any fees involved with your IVA are recuperated from your creditors by the insolvency practitioner over the term of the IVA.
The first step is to seek an organization like ourselves who will not charge you any fees for their service.
Once we have spoken to you, on the initial call we will assess your situation and establish whether an IVA is right for you, we will complete an income and expenditure (budget) which allows us to ascertain your affordability.
Without ascertaining your circumstances and affordability we cannot give you the appropriate advice.
Once we have confirmed an IVA is right for you we will need to see proof of income (like pay slips, recent bank statements, or benefits letters), information about your savings and assets (including how much they’re worth and bank statements for any savings), a list of all your debts and who they’re owed to, and any paperwork to do with your mortgage or rent agreement.
We will then work out a realistic repayment plan based on the budget you have shown us. The payments will be fixed at as much as you can afford each month, based on your budget.
Once a payment plan has been agreed, your insolvency practitioner will write a formal proposal of your IVA to your creditors. This will include a full report into your financial circumstances, details of the repayment plan, and reasons why your creditors will get more from the proposed IVA than if they made you bankrupt.
Your insolvency practitioner will then call a creditors meeting, during which your creditors will either accept or reject your proposed IVA. You do not need to attend any meeting, we will deal with the meeting on your behalf.
Creditors can suggest changes to the IVA, but the changes won’t go ahead without your consent. An IVA must be accepted by creditors who represent 75% of what you owe in order to be accepted. Once the IVA has been accepted, it is legally binding on all the creditors you have included in it, whether or not they voted for or against it.
The IVA becomes active straight away and you must begin your monthly payments to your insolvency practitioner. Your insolvency practitioner will supervise your IVA and make sure that the right creditors get the right payments.
If your financial situation changes at all, you must tell your insolvency practitioner, who may be able to change the terms of your IVA to suit your new situation. In the terms and conditions of your IVA there is a stipulation allowing you six months or more grace in the event of your financial situation changing (losing your job).
Your insolvency practitioner will also review your financial circumstances once a year: you will need to show them similar paperwork as during the IVA application process. This is to make sure that your monthly payments are neither too high nor too low.
If you are struggling to make the monthly payments you should speak to your insolvency practitioner as soon as you get into difficulties, so that they can help you as best they can. If you miss payments without speaking to your insolvency practitioner, or you become unable to make any payments at all, your IVA will fail.
If your IVA fails, you’ll still have all your debts (less what has been paid off during the agreement), and your creditors will be able to chase you or take legal action to recover the money you owe.
You’ll also still have to pay your insolvency practitioner’s fees. Your insolvency practitioner could ask the courts to make you bankrupt (if there is enough money left in the IVA), or your creditors could take action to make you bankrupt. If you don’t have any assets (money, valuables, or property), being made bankrupt could actually be a positive way of dealing with your debts. There are, however, many risks to being made bankrupt and you should do your research into the subject before taking any action.
If you don’t want to be made bankrupt, you need to contact your creditors as soon as you are no longer able to make payments, and work out individual repayment plans with each of them. If they refuse to negotiate, you may be made bankrupt against your will.
If you don’t have enough disposable income to make monthly payments, you can choose to include assets which will be sold to pay back some of your debts.
You must tell your insolvency practitioner about any assets you have, whether or not you plan to include them in the IVA.
If you are a homeowner, we will assist you to get a house valuation in the final year of your IVA. If there is equity in the property (meaning there is more value in the house than it would cost to pay off the mortgage and any loans secured against the house), you may be asked to remortgage the property to raise a lump sum of money. This money will be used to pay off as much as possible of your debts. You should not have to sell your house. If you are struggling to remortgage the house, you can pay an extra year’s worth of the monthly payments that you had been making instead.
An IVA is normally only suitable for people with a predictable, fixed income. In order to get an IVA, you must usually have at least £70 left in disposable income after you have met your essential living costs each month. Your creditors may still agree if you don’t have enough disposable income as long as you have assets that you can sell to raise money towards paying your debts. We would be able to offer you more specific advice once we know your specific circumstances.
To work out if you have enough disposable income, you’ll need to make a budget. Add up any income from benefits, maintenance payments, and employment, any lump sums of cash (for example an inheritance or competition win), and any defined contribution pensions, and then subtract your everyday outgoings (like rent or mortgage payments, utility bills, food bills, and childcare costs). If you decide to go ahead with an IVA, your insolvency practitioner will need to see your budget.
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