IVA - Individual Voluntary Arrangement
Find out how an IVA can help you consolidate and reduce your debt repayments – you may be able to get up to 80% of your debt written off.*
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*On average customers may have between 25% to 80% of debt written off with an Individual Voluntary Arrangement (IVA).
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What Options Are Out Here?
What is the meaning of IVA
Individual Voluntary Arrangement is a legal and formal agreement between a debtor and creditor(s) for repaying debts for 5 to 6 years. As a legal agreement, creditors are stopped from proceeding with legal persecution and compelled to give in to this voluntary arrangement. This is only set up with the aid of an insolvency practitioner. An accountant or lawyer qualifies to be your insolvency practitioner.
An IVA is subjective to suit the need of the debtor, only that it’s expensive. The cost can be reduced by going for an insolvency practitioner instead of a debt management firm. The money paid to the practitioner is relatively high and proportional to the amount paid back through IVA.
Although you can’t escape having your name and detail booked in insolvency register, still IVA remains a reasonable alternative to bankruptcy. Repayment under this arrangement can either be a lump sum, an affordable instalment, or both. Payment is made to the practitioner who later distributes to the creditor by standing order.
IVA freezes all interest and charges on the debt and writes off the unsecured debt after the payment period. IVA is available for residents of England, Wales and Northern Ireland. Whereas a similar debt solution to IVA is known as Trust Deed in Scotland.
What debts are covered by IVA?
IVA is suitable for unsecured debt like
- Personal loans
- Credit cards
- Payday loans
- Income tax / National Insurance arrears
- Council taxes
- Catalogue and store card debts
- Gas, electricity, and water bill arrears
- Tax credit/ benefit overpayments
- Debts to family and friends
- Joint debt
- Other outstanding bills.
Mortgage, secured loan, and rent arrears
Secured loans are loans that have assets like home as collateral. When the debtor fails to credit their creditor account with currency, creditors initiate phase two, repossession or foreclosure. Secured debts and mortgage are hard to write off by IVA, for the creditor gazes on the asset equity which glitters than the loans and can’t settle for anything less.
Inclusion of any secured debts should be authorised by the lender, without this, revocation should be expected.
Amount and number of debts that can be included in IVA
There’s no barrier to the monetary value of debt that is covered once the debt is supported by IVA. Pursuing an IVA doesn’t go easy on your pocket, it’s preferably to relieve from greater than £6000 debt.
Also, there’s no limitation to the numerical quantity of debts. IVA is apt for debts of more than one creditor. Conversing with your practitioner can answer many questions and saves your feet from briers of over-inclusion, exaggeration of IVA efficacy, or under utilisation of the arrangement.
Debts that can not be included under IVA
Here are debts that IVA leaves unaided for debtor:
- Social fund loans
- Tv license arrears
- Student loans
- Child support arrears
- Magistrates’ court fines
- Debt incurred through fraudulent acts.
- Maintenance arrears that have been ordered by the court.
These debts barred by IVA are to be dealt with before coasting along with the IVA repayment plan. Better still, debtors can find a more promising shelter under another debt solution options.
Including Joint debt in IVA depends on your partner subscribe-to option in facing debts. There’s a provision for connection of individual indebted amount to settle joint debt called Interlocking IVAs.
How affordable is an IVA?
The court law requires the debtor to hire an Insolvency Practitioner (IP). On the average, an IP charges you a fee to advice, nominate, and supervise an IVA. This fees is not constant but depends on the repayment made. These fees can be required in full to set up an IVA or deducted from the affordable instalment, but it all depends on the terms and conditions of the IP.
That’s why you should be careful about choosing an IP. The rule in selecting is comparing and contrasting them base on fees and other favourable terms.
Criteria for an IVA
IVA, as an alternative to bankruptcy, doesn’t mean it’s without entry conditions. These criteria can make bankruptcy glamorous for redemption from financial stress and have a fresh start. Here are the entry qualities for successful application of IVA:
- Monthly affordable repayment
For a proposal to be approved by creditors, they need nothing less than £100 monthly instalment. From debtor side, this can be afforded if you have a constant stream of income that equates to this amount after deduction of expenditures.
To increase your success rate, IP requires you to submit a copy of your budget to check the feasibility of complying in the stipulated period. Without regular and succulent earnings to account for monthly needs and a minimum of £70 instalment, commitment to IVA is going to be on the inadequate footing.
Is there any substance that brings the expectation of a substantial amount of money? These substances can be a promising compassionate friend, assets of high monetary value, heir to a treasure, etc. Also, retirement fund can be the lump sum, provided it will not be much a straitjacket to your survival and living.
IVA compels the debtor to disclose the ownership of all assets, including his home. In the final year, mortgaging of your home could be an option in balancing creditors. Although, selling of a home is outright wrong in IVA.
Living with IVA
IVA affect your credit rating, bank account, job, and possession, etc.
- Will I loose my Job after IVA
IVA doesn’t affect all jobs. There are some job you will have to stop practising if you subscribe to this debt solution. If you are eyeing IVA, this is a time to skim through the terms and conditions of your contract and service to deduce how it correlates with IVA.
You are free to possess anything at a whim from minute to great ones. However, not declaring your possession to IP is a crime. Some of this measurable treasure can be put on sales for a lump sum in debt financing.
- Future income
Although IVA is flexible, it creates a scooping field around you to pull any increase, windfall, considerable bonus, inheritance, and insurance refund to your creditors’ account. This prods a debtor to reconsider other debt solution before opting for an IVA.
- What happens to my Home after IVA
There may be a need for remortgaging of the home depending on the value of a home, existing mortgage, and feasibility of preventing foreclosure.
- Can I get a New Bank account with IVA
While setting up an IVA, there may need to open another bank account because banks can automatically take from your existing accounting to settle debts. Does this happen with all account? No, only with the ones with banks that’s your credit card issuer, lender, or credit company presides over.
There’s a higher tendency for your saving to be used in financing debt and retirement funds can be expended to the same effect. Debt financing under this arrangement can stop the paying into a pension to refund debt through IVA servitude.
- Getting credit with IVA
Short term credit is difficult to access while under IVA, but it is still available for personal goods. Perhaps the debtor has a business, there’s ample chance for business good. Credit more than £500 need permission from IP except for essential public utilities like water, gas, electricity, etc.
Also, the debtor details will be posted on the Individual Insolvency Register for three months. The IVA reputation will be held on your credit reference file for 6 years for creditors consideration before they leap into offering credits.
How to Set up an IVA
In four steps, an IVA is set up but not without an IP. These steps are
- Selecting an IP
Contact different IP and ask for quotations for contrasting for the best deal and also look out for IP offering a free introductory meeting. Then, meet with your IP via phone or IP office for a briefing on IVA cons and pros.
There’s no need for involving a debt management firm as they charge extra for recommending an IP.
- Frequent meeting with IP
IP is indispensable to setting up IVA, and the debtor must be ready to submit document and paperwork at IP request without compromising in any way. The necessary documents include:
- Payslip, bank statements, benefits letter for proof of income
- Bank statements for proving savings.
- Mortgage details and rent consensus
- Budget featuring income and expenditure
- List of an asset with the usefulness
- Details of debts and creditors
- IP duties
IP can request for an interim order to overrule any legal proceeding by creditors against the debtor. Also, an IP presents a proposal before the court and the creditors. This proposal contains a proof of income and details justifying that creditors will recover more than in debtor bankruptcy.
- Creditor accepting or refusing the proposal.
Creditors have more likeness to accept the proposal if it’s drawn to their layout. They also have the right to accept or reject the suggested plan in a meeting held in the IP office. You can be present at the meeting to intercede for your interest. It’s accepted provided that creditors with 75℅ of debt and above appraise it. There are only 28 days for them to object to the proposal.
Managing an IVA
IVA can be an adjustment to accommodate the changing in situations if either positive or negative. Even, not telling your IP is considered as a dishonest act. Unknown debt can be added after setting up an IVA.