Individual voluntary arrangements right for you?
Individual voluntary arrangement (IVA) is a formal agreement to repay at an amount you could afford to your creditors.
This could be a one-off payment known as a lump sum IVA or over a long period to spread payments which lasts for five or six years. You make one payment to us each month affordably and then we divide among your creditors fairly. During your IVA creditors should not be allowed to contact you or even increase your debt.
When the final payment is being made, any debt left is going to get written off.
If you live in Scotland, IVAs are made unavailable. In Scotland, a protected trust deed is a similar solution, but it is important to note that it has different fees, benefits and risks along with it.
Other issues to consider with IVA
There are other issues you should consider first before you make the decision to enter into VTA:
- The creditors may back date interest on your debts or may request that the Supervisor of your IVA petitions for your bankruptcy if IVA fail.
- Your spending will get restricted until the IVA comes to an end once your IVA has officially set up.
- You may ask creditors to review the terms you originally agreed to if your circumstances have changed during the term of your VTA. During your IVA you will get an annual review and you may have to increase your payment if your situation has improved.
- The only debts included in the arrangement will be discharged at the end of the agreement.
- Debts such as the money owed under family court proceedings, any court fines or debts arising from fraud, debts incurred after the IVA, or student loans cannot be included and will still be left to pay.
- We do not charge for the advice and support we give before your IVA is set up. There are fees involved in running your IVA. Our fees are set by your creditors and follow the industry standard for IVAs. Before your IVA is approved you must agree to the level of fees. We will deduct the fees from your monthly payment so that you don’t have to pay any additional costs.
- If you being recommended an IVA, you are either self-employed or live in Northern Ireland, you will get referred to a trusted insolvency practitioner who will administer and set up your IVA.
- If you are a homeowner you will be asked to re-mortgage your property 6 months before your IVA expires. If you are unable to re-mortgage you could make 12 extra payments max or a 3rd party can offer a sum equivalent to the equity as an alternative..
Learn more about IVAs:
Is IVA the right option for me?
IVA may be the right option if you could afford to pay something to your debts but not the full amount your creditors want. You may also qualify for an IVA If you have a lump sum to pay off your debts.
An individual voluntary agreement (IVA) is a form of insolvency, but different from bankruptcy. Opting for an IVA allows you to secure yourself from complete insolvency.However, before choosing an IVA, you must consider the following ;
An IVA will utilize your personal assets including your personal savings to pay the creditors based on the applicable interest rates.
You have a minimum of two different debts that add up to a min of £5,000.
The payments from your personal assets can affect your job as well as result in remortgaging your house for the payment.
In case you are unable to keep up with the payments required in the IVA, the creditors will retreat from the agreement resulting in the failure of the terms. This could result in complete insolvency.
How does an IVA work?
An IVA is managed by an insolvency practitioner (IP), who can help you with a repayment proposal to send to your creditors. At Free Debt Helpline we have our very own IVA company with two licensed IPs who will be able to help you with your proposal to suit your personal circumstances.
Your IP will hold a meeting with your creditors whether your creditors decide to either accept or reject your proposals. If your IVA has been accepted it becomes legally binding. As long as you follow the terms and conditions of your IVA, none of your unsecured creditor who did not vote or vote against IVA will pursue you for any debt incurred prior to approval of the IVA. An IVA is a form of insolvency so it is important that you get an expert, impartial advice before entering into IVA.
The IVA is a formal legally binding contract between you and your creditors that opt for repaying your debts. The flexibility of an IVA is based on the expenses and the risks that prevail during the establishment of the agreement.
2.1 Debts to be included in IVA:During the establishment of the agreement, you should consider including the following debts within the agreement:
- Non-priority debts including credit card
- loans, personal loans, building loans, catalogs, overdrafts etc.
- Priority debts including tax debts, utility debts etc. In addition, mortgages, secured loans, rents can also be included in the debt information.
- However, you cannot include maintenance arrears ordered by a court, student loans, child support debts, and court fines.
- Furthermore, you cannot opt for joint IVAs if you have joint debts. However, individual IVAs can be chosen for the payment of the debts separately.
2.2 Asset Requirement in IVA:
In terms of the requirement for the assets and income for the agreement, you should concise your financial information regarding your assets, income, and debts.
- In terms of the payments through IVA, it is necessary to own a minimum of £100 as monthly savings after the payment of creditor’s monthly income.
- In addition, you can consult your insolvency practitioner for management of your savings by keeping the idea of monthly payments. If you have a predictable income, you can still consult your insolvency practitioner for advice in terms of making payment plans considering your income generation.
- It is better if you formulate a budget plan to concise your income, expenses and monthly payments that are to be processed for the creditors. This will provide you with a complete view of your financials.
- In case of having lump sum of money through leftovers in wills or other means, you need to consider them for the plan for better management of your payments.
- Anything you own of significant value including home, property, stocks etc. will be considered for the agreement in order to manage the payments.
2.3 Signing up for IVA:
For opting for the IVA, the first step is the choice of an insolvency practitioner. Online searching will allow finding better results in this matter. In addition, we at Free Debt Helpline provide effective advice on choosing an optimum insolvency practitioner.
The meeting with the IVA practitioner consists of an explanation of all available options in terms of the financials required as well as the management of the monthly income for personal expenditures.
Afterwards, your insolvency practitioner IP will apply to the court for an interim order to avoid creditors from making you go bankrupt.
Since you and your assets are now protected from bankruptcy, your IP will consider your finances for assessment on the monthly payments. This will include your assets’ information, monthly incomes, debts towards the creditors and other financial information required in the process.
After the assessment of your finances have been completed, your insolvency practitioner will devise a proposal plan in terms of the payments to the creditors. This proposal will include:
- Your complete financial details including debts, income, expenditures, properties etc.
- Statements proposing the length of the IVA and the method of payments.
- Your response convincing the creditors to agree to the terms of IVA instead of bankruptcy
- After the proposal has been established, your IP will send the agreement over to your creditors to seek their opinion in terms of approval or rejection.
What are cost of IVA fees?
When you set up an IVA there is always fees involved. The only fees that you will need to pay is a nominee fee which is the fee that will cover the cost of starting up your IVA. The Supervisor fee is for the IVA administration and there are disbursement fees which are costs that we pay to the third party during the IVA.
At Free Debt Helpline our fees are set at the industry standard and we will make sure you are aware of what we are charging. The fees are being paid out from monthly contributions or from proceeds of a sale of assets so there is nothing to pay up front.