An IVA can be a great solution to serious debt problems, and a genuine alternative to bankruptcy. With an IVA, you can legally pay back your debts over a set period.
What’s an IVA?
An Individual Voluntary Agreements (IVA) is designed as an alternative for people who would otherwise have no choice but to declare bankruptcy. Since IVA debt management was introduced in 1986 as part of the Insolvency Act, they have become a widely used solution for people to solve their debt problems.
Many believe IVAs to be too good to be true, but this debt management solution has helped thousands of people become debt-free. An IVA debt gives you more control of your assets than declaring bankruptcy.
From setting up your IVA to helping you in the creditors meeting, our team of IVA advisors provides all the help you need when arranging an IVA. You can ask them all about the advantages, disadvantages and the process of applying for an IVA as they are highly knowledgeable in dealing with this kind of debt help management. Trust our advisors to lead you to the best outcome in clearing all your debts. We guarantee a smooth process from the initial meeting to the final settlement.
Know more about IVAs by reading the details below. For enquiries, don’t hesitate to give us a call.
How does IVA work?
IVAs are arranged on the basis that you will make regular monthly repayments for a fixed period of time; typically, this is over five years. However, in limited cases the IVA may instead involve making a one-off lump sum payment to your creditors, usually raised from assets such as equity in your home. In all cases, our specialist IVA practitioners will carry out an assessment of your finances and recommend what will be the best option for you.
How an IVA can help you clear your debts?
- It can write off all of the debt you can’t afford
- You can clear your debts in 60 months or less
- It can put a stop to calls and letters from your creditors
- Will consolidate debts to one lower, affordable monthly payment
- It will prevent or stop legal action, including bankruptcy
How do I arrange an IVA?
Only a licensed Insolvency Practitioner is able to set up and manage an IVA. If you are in debt and feel that an IVA might be the solution you’re looking for then the first step is to speak to one of our advisors. Feel free to discuss with our advisors your current situation, income, outgoings and debts. This will help us determine if an IVA is the best option for you. If yes, we will prepare your case and appoint one of our Insolvency Practitioners to act on your behalf.
What are the advantages of Individual Voluntary Arrangements?
Have some of your debts written off- In an IVA your creditors agree to accept payment of a percentage of the outstanding debt with the remaining balance being written off. Although the amount written off will vary from case to case it is sometimes possible to write off as much as 80% of what you owe.
What debts can go into an IVA?
IVAs can be used to pay off unsecured debts such as:
- Personal loans
- Credit and store cards
- Overdrafts
- Council Tax arrears
- Catalogue debt
- Benefit arrears
IVAs cannot be used, however, to pay off secured loans and mortgages. Nevertheless, the computation of IVA settlements will consider your other loans so you’ll have enough to pay for them.
How long does it take to set up an IVA?
Usually an IVA can be set up in six to eight weeks, our Insolvency Practitioner drafts a proposal to your creditors and convenes a creditors meeting. At this meeting the Insolvency Practitioner negotiates on your behalf with creditors, they then vote on whether to accept or reject the IVA proposal put forward. Often creditors send their vote and don’t actually attend the meeting, but it’s vital that all your creditors are contacted. If they have no notice of the meeting they do not have to be bound by the terms of the IVA and can pursue you for their debt separately.
What happens at the Creditors Meeting?
Creditors vote on whether to accept or reject the IVA proposal put forward by our practitioner, for the arrangement to go ahead you need the agreement of at least 75% of your creditors. If 75% of your creditors ‘by value’ agree to the IVA, then the rest are bound to accept, even if they voted against it or even did not vote at all. ‘By Value’ means the creditors to whom you owe 75% worth of debt, not the number of creditors you have in total.
If the proposal is accepted, then what happens next?
Once the IVA settlement is agreed our Insolvency Practitioner will supervise the arrangement and make sure things run smoothly, but we will also take an interest in the case and will keep you up to date at all times on the progress. An IVA can help you avoid having to declare bankruptcy, but you need to keep making the payments that have been agreed. It is therefore very important for you to let our IVA practitioners know the true extent on your debts – we need you to be completely honest with us about your financial circumstances, that way we can do our best for you and get the right settlement for you.
If you are suffering from serious financial problems entering into an IVA can be a great way to clear your debts and get your finances back on track, there are advantages and disadvantages.
Is an Individual Voluntary Arrangement (IVA) the best debt management solution for you?
At Debt Helpline, we help our clients thoroughly know their options to help them make an informed decision. Before applying for an IVA, consider its other advantages and disadvantages.
More Advantages of Individual Voluntary Arrangements (IVAs)
Freeze the interest- When the IVA starts all interest and charges are stopped so the amount you owe doesn’t increase
Legally binding- IVAs are legally binding and so providing you keep up with your repayments your creditors are bound by the terms of the arrangement so you’ll have the security that your creditors cannot go back on the agreement.
Reduce your repayments- When entering IVA normal debt repayments are cancelled and replaced by a single affordable regular payment. Instead of making payments to your creditors you make them to your IVA provider who will distribute the funds on your behalf.
Become debt free in a fixed period of time- The vast majority of IVAs will run for five years or less, by entering into an IVA you know that you will be free from debt in the length of time agreed at the start of the arrangement.
Avoid bankruptcy and legal action- Any legal action taken by your creditors, including bankruptcy proceedings, is stopped once the IVA is approved. Creditors are also no longer allowed to demand payment directly either by phone or by letter.
There are no additional fees- In a typical IVA two fees are charged, the nominee’s fee is payment for the work done in setting up the arrangement and the supervisor’s fee covers the costs incurred in managing the IVA over its duration. These costs are however included in the monthly repayments meaning that you will not be charged any extra fees, the exact amount of these charges is agreed between your Insolvency Practitioner and creditors.
Benefits to your creditors- The net returns to your creditors in an IVA are often higher than would be the case if you were to instead become bankrupt and costs of the arrangement are also often lower than bankruptcy fees.
Disadvantages of Individual Voluntary Arrangements (IVAs)
IVA’s are legally binding- Although the fact that an IVA is a legal agreement between you and your creditors can be seen as a positive there are occasions when it will be a drawback. Since it is a formal arrangement you are committed to sticking to its terms and in the event that you can no longer keep up with the payments then it is possible the IVA will fail.
IVAs are less flexible than a Debt Management Plan- In a DMP there is a flexibility and payments can be altered when necessary as circumstances change. This is not the case in an IVA where the size of repayments is agreed from the start and can be very difficult to change. In some cases IVA payments can be changed however this is very much dependent on circumstances.
IVA’s have a strict qualifying criteria- Even if you have major debt problems there is no guarantee that you will qualify for an IVA. IVAs are only suitable for people with large amounts of debt and only certain types of unsecured debt can be included. A further issue is that at least 75% of your creditors need to approve the IVA for it to go ahead. This means that if you owe more than 25% of your total debt to one creditor and this creditor votes against the IVA proposal, then it will fail.
An IVA will affect your credit rating- The IVA will be noted on your credit file and will remain there for the duration of the agreement. This means that it can be a number of years before you can start to improve your credit rating but it should be noted that other alternatives to IVAs such as bankruptcy will also impact on your credit rating.