IVA - Individual Voluntary Arrangement

What Is An IVA?

An IVA (Individual Voluntary Arrangement) is a formal agreement made between the person in debt and their creditors. Once you enter into an IVA your creditors can no longer take further action against you to recover any outstanding debts, All interest and charges associated with your debts are frozen.

All IVAs are set up and managed by an Insolvency Practitioner (IP), An IVA is a form of insolvency that can potentially right off up to 90% of your debts and is also an alternative to bankruptcy. 

In an IVA a single payment is agreed with your financial situation taken into consideration, The payment is then divided between the unsecured creditors over a set period of time (usually five years), after which any remaining debts are written off. 

Once you enter into an IVA (individual voluntary arrangement) your creditors are legally bound by the terms and conditions imposed by an IVA, These include stopping to take any further action or contacting you directly.

Whilst there are no legal maximum or minimum amounts you must owe to get an IVA, Usually, you must owe at least £5,000 to get your creditors to agree to the IVA. You can owe this amount across more than one debt, with more than one creditor.

At the end of your IVA, Any debt remaining will be written off and you will become debt-free.

An IVA is open to residents of England, Wales and Northern Ireland. Scottish residents can find support in the form of a (PTD) Trust Deed or also known as a Protected Trust Deed.

Advantages of An IVA

No upfront fee's

It's affordable, You only pay back what you can afford and normally only an agreed percentage of your debts

You make only a single payment each month which is distributed to creditors on your behalf.

You will be debt-free in a set period of time, normally 5 years

Once your IVA is approved, All your creditors must agree to the IVA. Including the terms and conditions attached to an IVA

By law, all interest and charges are frozen as long as you maintain your payments

Your creditors will stop calling, Once enough of your creditors agree to an IVA at least 75% in value of the creditors will need to vote in favour

Legally binding this means all creditor action, contact and demands will stop once the IVA has been approved

You won't be forced to sell your home, Your home is a protected asset in an IVA

Types of debts you can include in an IVA

Credit Cards

Loans

Store Cards

Catalogues

Court Debts

Business Debts

Overdrafts

Payday Loans

Utility Bills

Car Finance

Who Can Get An IVA?

An IVA (individual voluntary arrangement) is normally only suitable for people who are struggling to maintain payments to their current debts and have a regular income.

In order to get an IVA, you must have spare income after you have met your essential living costs each month.

Your creditors will be obliged to agree to an IVA if you meet the other criteria needed to get an IVA plan. Your insolvency practitioner will be able to offer you more specific advice once they know your circumstances.

In order to qualify for an IVA, you must reside in England, Wales or Northern Ireland. You will also need the minimum requirements:

 Have £5,000 or More of unsecured debt

✔ Owe money to two or more creditors 

 Live in England, Wales or Northern Ireland

Maintain a payment of a minimum of £70 per month 

You can see if you qualify for an IVA and whether you can write off up to 90% of unsecured debt

Debts Cannot be Included In An IVA

 

Existing Mortgages

Secured Debts

Active Finance Agreements

Fraudulent Debts

Court Fines

TV Licence

Student Loans

Child Support Arrears

IVA Process

An IVA (Individual Voluntary Arrangement) was introduced as part of The Insolvency Act 1986 to help debtors come to an arrangement to pay debts over a set period of time as an alternative to bankruptcy.

An IVA is a legally binding agreement made between a debtor and his/her creditors, due to the legality and regulations imposed on Insolvency Practitioners there is a set process each IVA application must follow:

Complete A Review and Budget

You will initially complete a review with a debt advisor (FCA Authorised) to identify an IVA is the right solution for you, this will include completing an income and expenditure to understand really what you can afford

The Income and Expenditure Budget will be based on the money you have left after living costs have been taken into consideration. This includes your household bills such as Rent/Mortgage, Food, Gas and Electric.

The proposed payment in your IVA is designed to help still live a comfortable life while repayments are made to your debts, each year your income and expenditure will be reviewed to ensure any payments are still manageable

Prepare Your Proposal

We will prepare and issue a proposal to your creditors to demonstrate to them how much you can afford to pay towards your debts

Before this proposal is sent to your creditors your Insolvency Practitioner will ask you to gather information, they will need to prepare your proposal, this is the basic information requested to help determine any advice given by way of an IVA (Individual Voluntary Arrangement) is the correct option for you

Typical information/paperwork needed:

  • Payslips
  • Bank Statements
  • Proof of Benefits
  • Photo ID
  • Proof of Address
  • Proof of Rent / Mortgage
  • Proof of Debts / Credit Report
  • Proof of Vehicle Finance
  • Proof of Childcare / Nursery Costs / Child Maintenance
  • Tax Return (Self Employed) – If No Tax Return Cashflow Forecast

Note your qualified debt advisor can help you gather this information and many insolvency practitioners do not require all the information listed above.

Once your IP (Insolvency Practitioner) has this information they will prepare your proposal to be submitted to you for your perusal to make sure the information in your proposal is accurate as this is a legal document which will be sent to your creditors, this process is where the insolvency practitioner gives your creditors notice for your MOC (Meeting of Creditors) normally 14 days.

You will be expected to sign and date your proposal before it is issued to your creditors, generally this is done by e-signature but can also be done via post.

Meeting of Creditors (MOC)

Once your Insolvency Practitioner has submitted your proposal then it is a case of waiting for a meeting date, this is the date the creditors normally agree or reject your IVA proposal

At least 75% in value of the creditors who vote on your IVA must vote in favour in order for it to be approved, IVA Debt UK has a current approval rate of 97% of all proposed IVAs being accepted

There may be a situation where your creditors reject your IVA, in this instance, we will negotiate with your creditors to get your IVA approved. Creditors can reject IVAs for many reasons from asking your Insolvency Practitioner to reduce there fee’s to asking you to contribute more to your IVA or extending the term of your IVA to 6 or 7 years, Any changes are negotiated with you and your creditors to essentially help mediate a realistic outcome for all involved.

What happens to your house if you get an IVA?

If you own your home, you will almost certainly be asked to get a valuation on your house in the last year of your IVA. If remortgaging the house would raise more than £5,000, you will be asked to remortgage it and any money raised will be put towards paying back your debts. You will not have to sell your home. If remortgaging would extend the mortgage beyond its existing term, or put you beyond the state retirement age when it ends, you will not be expected to remortgage the property.

If you can’t remortgage your house for any reason (refusal by the bank, or complications with a jointly owned property, for example), you will have to pay your usual monthly payments under the terms of the IVA for an additional year.

It is possible but unlikely that you will be able to keep your home out of the IVA and thus avoid remortgaging it. If your insolvency practitioner feels that you will be able to pay back enough of your debts without including your house in your IVA, they may propose that it be excluded from the IVA when negotiating with your creditors, but this rarely happens.

An IVA is a preferred option by many homeowners as your asset is protected whereas the alternative of bankruptcy you would in most cases be asked to sell you home.

If you rent your home, nothing will happen as long as you keep paying your rent but we would always advise for you to check your tenancy agreement before entering any agreement.

IVA Costs and Fees

An IVA (individual voluntary arrangement) is not free. Legally you cannot set up your own IVA. The insolvency practitioner who will set up your IVA will charge a fee.

This fee is normally taken as regular instalments from the payments you make towards your IVA (debts). The fee is to cover the cost of the advice offered by the insolvency practitioner, the time spent putting together the legal aspects of the IVA and negotiating with your creditors, also managing the IVA once it is set up.

Is There An Application Fee Cost?

When you are choosing which insolvency practitioner to work with be sure to choose an insolvency practitioner who does not charge upfront fee’s like Money Support Group. We are one of the many companies that offer free debt advice and choose not to charge you upfront for our service

IVA Fee Breakdown

 Nominee Fee

A nominee fee is charged as a cost to help set up your IVA, This cost includes preparing your IVA proposal and holding your creditors meeting to get your IVA approved. Depending on whether your creditors agree your insolvency practitioner can charge on average your first five monthly contributions or between £1,200 to £2,000 as a fee.

Your IVA can be rejected by your creditors on this occasion they may ask your Insolvency Practitioner to reduce the nominee fee before an IVA is approved

 Supervisor Fee

Once your IVA is approved, a monthly supervisors fee of 15% will be charged on all future realisations. The supervisor fee covers all ongoing cost of your IVA.

An Insolvency Practitioner will supervise your IVA for the duration of an IVA normally a 5 year period, act as a go-between making sure your IVA is sustainable and are there to help you with any potential changes in your personal circumstances

You will normally have a personal supervisor who will manage the day to day running of your IVA, furthermore, your supervisor will conduct a yearly review once a year throughout the term of your IVA

Disbursements

Disbursement costs are paid to third parties, the cost covers essentials such as insurance, software and regulatory fees. 

Fee When Referred For An IVA By Courts

If the courts have referred you for an IVA during bankruptcy proceedings, you will have to pay a fee of £335 from your bankruptcy petition deposit to your insolvency practitioner. You cannot get Legal Aid to help with setting up an IVA.

Help With IVA Costs

You cannot get legal aid or grants to help set up an IVA

IVA Costs and Fees

An IVA (individual voluntary arrangement) is not free. Legally you cannot set up your own IVA. The insolvency practitioner who will set up your IVA will charge a fee.

This fee is normally taken as regular instalments from the payments you make towards your IVA (debts). The fee is to cover the cost of the advice offered by the insolvency practitioner, the time spent putting together the legal aspects of the IVA and negotiating with your creditors, also managing the IVA once it is set up.

Is There An Application Fee Cost?

When you are choosing which insolvency practitioner to work with be sure to choose an insolvency practitioner who does not charge upfront fee’s like Money Support Group. We are one of the many companies that offer free debt advice and choose not to charge you upfront for our service

IVA Fee Breakdown

 Nominee Fee

A nominee fee is charged as a cost to help set up your IVA, This cost includes preparing your IVA proposal and holding your creditors meeting to get your IVA approved. Depending on whether your creditors agree your insolvency practitioner can charge on average your first five monthly contributions or between £1,200 to £2,000 as a fee.

Your IVA can be rejected by your creditors on this occasion they may ask your Insolvency Practitioner to reduce the nominee fee before an IVA is approved

 Supervisor Fee

Once your IVA is approved, a monthly supervisors fee of 15% will be charged on all future realisations. The supervisor fee covers all ongoing cost of your IVA.

An Insolvency Practitioner will supervise your IVA for the duration of an IVA normally a 5 year period, act as a go-between making sure your IVA is sustainable and are there to help you with any potential changes in your personal circumstances

You will normally have a personal supervisor who will manage the day to day running of your IVA, furthermore, your supervisor will conduct a yearly review once a year throughout the term of your IVA

Disbursements

Disbursement costs are paid to third parties, the cost covers essentials such as insurance, software and regulatory fees. 

Fee When Referred For An IVA By Courts

If the courts have referred you for an IVA during bankruptcy proceedings, you will have to pay a fee of £335 from your bankruptcy petition deposit to your insolvency practitioner. You cannot get Legal Aid to help with setting up an IVA.

Help With IVA Costs

You cannot get legal aid or grants to help set up an IVA

When Do You Receive A IVA Certificate

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.

Disadvantages of An IVA

IVAs are an expensive way to deal with problem debts. Beyond the insolvency practitioner’s fees, which can be very high, in order to complete your IVA you must make regular monthly payments for around five years. If your circumstances are likely to change or you don’t have a predictable source of income an IVA is probably not right for you.

You may have to sell more expensive assets (like cars, valuable jewellery, or any property that isn’t your family home), and in some cases you may have to remortgage your home at the end of your IVA.

Some other disadvantages of an IVA are that you will find it more difficult to get credit if you’ve had an IVA, which can affect things like catalogue shopping and obtaining a mortgage, as well as the more obvious things like getting a personal loan or credit card.

Certain professions are also not allowed to practice if they have gone through an insolvency procedure, which includes IVAs. Common professions covered by these restrictions are accountancy and legal services, but you should check your contract of employment and with any professional bodies to find out if you may be affected.

 IVAs can be refused, Your creditors can refuse your IVA proposal but in most cases, we can negotiate with your creditors to get your IVA approved

  An IVA is a formal agreement, Therefore you need to make sure you comply with the terms and conditions attached to an IVA

  Your monthly repayments may leave you with a tight budget whilst your debts are repaid

 It will affect your credit score. IVAs remain on your credit file for 6 years from the day it starts, Some IVAs can last longer, therefore, this will show on your credit file for longer

 Not all debts can be included in an IVA, or example student loans, child support and maintenance, magistrate court fines and social fund loans are excluded from an IVA, but an allowance can be given to enable you to continue repaying these.

 If you fail to make the payments due under the terms of your IVA, then your arrangement could fail.

 Your IVA will be listed on the Individual Insolvency Service register

 If you fail to make the payments due under the terms of your IVA, then your arrangement could fail.

IVA Calculator

 

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