IVA
An IVA (Individual Voluntary Arrangement) may be the best option when you are struggling to cope with unsecured debts to such an extent that you cannot afford your monthly repayments but want to avoid bankruptcy.
Unlike an informal debt management plan, an IVA involves a legally binding contract made between you and your creditors. In an IVA proposal you will try to come to an agreement to pay only what you can realistically afford on your outstanding debts and avoid bankruptcy.
An IVA is brokered on your behalf by a Licensed Insolvency Practitioner (IP) who will assess your situation and approach your creditors with your proposal.
He or she will attempt to negotiate a settlement with your creditors, or at least the majority of them. For your creditors though, even a reduced payment of your original loan total could be a better option for them than the expense of pursuing a claim in bankruptcy.
In standard agreements you will pay what you can realistically afford monthly over a period of five years. This will be a single monthly repayment into a fund managed by your Insolvency Practitioner. When the IVA has been succcessfully completed, any amount left unpaid against the original amount will be written off by your creditors, leaving you debt free.
Any agreement becomes legally binding on both parties, so you should not enter into one if you have no realistic prospect of meeting your repayments. However, the contract is legally binding on your creditors too. That means if you manage to keep up your repayments, your creditors cannot take any further action against you. Also, unlike bankruptcy, proposals are private agreements between your debt advisors and your creditors, and no one else need know your circumstances. Furthermore, you don’t risk losing your job if you work in a profession where being bankrupt can lead to you being dismissed.
How do IVAs work?
The timeline can vary as can the exact procedure and here we will give an overview. For more details you should read our more detailed
IVA Procedure resource.
If you decide to apply , one of our professional debt advisors will contact you to discuss your circumstances and to see if this is really the best option for you. He or she will collate all the relevant evidence to your financial and other circumstances to try and build a proposal that will be acceptable to your creditors. He or she will also try to establish the circumstances that led to the debt problems in the first place, such as ill-health, divorce, or a loss of employment for example.
This process is highly complex and can involve many different parties, and hence can take up to 4 to 6 weeks During this time your Insolvency Practitioner will carry out fact finding, write the proposal, organise signatures and distribute any relevant documentation. However, once you’ve outlined your circumstances and provided any supporting documentation, much of the work will be done for you, although you will of course need to read and sign any documentation drawn up on your behalf.
The final proposal will be submitted to the court and your creditors. Your creditors will later hold a meeting to consider your proposal, usually within 2-4 weeks. You would not normally be present at this meeting, instead you will be represented by your Insolvency Practitioner who acts as Chairman and formally proposes your Individual Voluntary Arrangement.
In the meeting your creditors will discuss whether or not to accept or reject your proposal or call for its modification. There’s no guarantee that your proposal will be accepted, but a licensed Insolvency Practitioner will not propose an IVA that in his or her experience isn’t likely to succeed.
If 75% of your creditors (75% in terms of the amount of money owed) present at the meeting agree to the proposal, they will approve it and appoint a Supervisor, who will usually be the Insolvency Practitioner who proposed the IVA on your behalf.
None of your creditors can break ranks once they have been notified of the meeting and an individual voluntary arrangement has been agreed. All are bound by the terms of the IVA, even if they voted against it or didn’t vote at all.
If you keep up your repayments during the period of the Individual Voluntary Arrangement, you will be completely discharged of any liabilities to your creditors – in other words you will be debt free.
Click here to see more information about the Pros and Cons of an IVA or you can see our list of Frequently Asked Questions on Individual Voluntary Arrangements here.
If you wish to find out more about an IVA or ask Debtsolver for free, professional IVA debt advice use our online application form Alternatively, you can call us on 08000 434 336 any time; 24 hours 7 days a week.
