Being in debt can be a stressful time and deciding what the best debt solution is for you can be hard to understand. This article is here to try and explain the process of an IVA. If the first question is what is an IVA? Then this stands for individual voluntary agreement.
Something we strongly recommend is getting yourself a credit check before anything.
An IVA might be the perfect solution for you if you want to consolidate your outgoings into one affordable payment. The individual voluntary agreement allows you to be debt free in 5 years. Over the 60 months payment you can actually pay your creditors a lump sum to settle this early. There is no set length written into the Insolvency Act 1986 so an IVA could last less than 5 years in length.
The IVA definition is a legally binding agreement between yourself and your creditors you owe money to. It is an alternative to bankruptcy where you agree an amount you can afford each month over a fixed 5 year period. It allows any unsecured debts to be written off at the end of the 5 year period.
Is there any IVA companies to avoid? That is a very good question and there has been many forums highlighting scammers who have mis-sold IVAs. You need to remember an IVA is not for everyone and sometimes a debt management plan or a remortgage might be a better solution. Many complaints are shown on IVA companies reviews because they did not tell them everything. The FCA have done a great job to clean this up and bad practice has improved massively over the last few years.
After you have spoken to a debt consultant and understood that an IVA is the best solution for you then comes the proposal. This will be collating your information into a case to refer this onto an Insolvency Practitioner. All the relevant information the IP will need will be collected and prepared so that the Insolvency Practitioner can present this to all your creditors in an orderly manner.
Before an IVA Proposal can be drafted you will need to provide proof of your financials. Your IP will also want to know the details of the circumstances that have led to your current difficulty into paying your debt. The income and expenditure are important to make sure you can afford to keep up with payments for this proposal with creditors. The Insolvency Practitioner will want to know :-
The details about your debts will need paperwork on all your household expenditure, rent or mortgage agreements, food bills, utility bills and they would want to see this on bank statements to make sure nothing is missing from the list. Then wage slips will be required to make sure you have enough disposable income to afford this IVA proposal that the IP is going to position to the creditors.
The Statement of Affairs is the names used for the proposal of your current financial circumstances. The assets and liabilities are what forms the basis of your IVA proposal. The Statement of Affairs will contain creditor details as well as a breakdown of your income and expenditure.
The disposable income is what is worked out to see what monthly payments can be afforded. At this stage, your IP may also apply for an Interim Order, which is a legal injunction preventing your creditors from taking further action against you until your IVA proposal has been considered.
When the statement of affairs is all packaged then the IP will arrange what's referred to as the 'SIP 3' call. Having this sip3 call is a legal requirement of the IVA process and helps the drafter become familiar with the applicant's circumstances.
The SIP3 call is an ideal opportunity for the drafter to become more familiar with the history of their financial problems so they understand how they got into the debts in the first place.
Once the chosen Insolvency Practitioner has got all the packaged case then comes the MOC. MOC stands for meeting of creditors. Your nominated IP will arrange a venue, time and date for the creditors to meet. In practice this never usually happens and the creditors just communicate via email or letter.
All the provided information of debt levels, disposable income and proof of debts is sent to the creditors. Then a ‘proxy voting’ system is set up where they accept or reject the proposal of the IVA. The IP will present a figure you can afford each month to pay back and the rest after the 5 year window will be written off.
For the IVA to be approved then minimum 75% of the creditors must approve the settlement. Many creditors agree to this because it is there only option of getting some money back over the 5 years because other options could be bankruptcy where the creditors will receive zero.
There could be many reasons why an IVA at first could be refused. But it is about working through these to check whether they understand the credit file properly. A common reason is an iva rejected due to gambling being on the bank statements because if still showing gambling transactions then the creditors will pose the question are they going to keep up with the IVA payments.
Many ask how often are IVA refused? And the answer to this is it’s pretty common but the creditors could ask for modifications before giving approval.
If for some reason the creditors expectations are so far off then no need to panic because there is plenty of other options. This could be a debt management plan, remortgage if too much equity in the property or even worse case scenario bankruptcy. Should you ever be rejected an IVA then visit this website and complete the form to see what other options you have to become debt free.
Now if the IVA is officially approved it becomes binding on you and on all of your unsecured creditors, including those creditors who chose not to vote at all.
The meeting of creditors is where the contracts are approved or rejected. Once agreed then this is binding and an agreement is put in place that you will pay the agreed figure for 5 years and any debts still owed on month 60 will just be written and sometimes in IVAs this could be over 85% of debts written off.
Step 4 is the commencement of your IVA. The chairman of the meeting of creditors prepares the ‘Chairman Report’ and circulates it to all creditors and yourself. This MOC chairman’s report is also sent to your mortgage provider, bank and to the court (for Northern Ireland cases but not for cases in England or Wales).
It demonstrates what you must do to successfully complete your individual voluntary agreement. It also identifies the name of the Insolvency Practitioner who is going to manage your IVA. This is often although not always the same Insolvency Practitioner who acted for you as nominee up until the MOC.
All of your unsecured debts will be dealt with under your individual voluntary agreement now. So at this point all of your creditors should stop chasing you for money and hassling you anymore. You will just now have one monthly payment to your agreed IVA. This one monthly affordable payment you make will be distributed to your creditors.
Provided you stick to the terms of your IVA you can expect to be debt free in five years. Provided you maintain your payments there is no reason why your IVA should not be successfully concluded. Even if there should be a serious adverse change in your financial circumstances during the life of the IVA, your supervisor may be able to offer creditors proposals to vary its terms.
Once you have paid the IVA off completely then it is time to rebuild your credit file. The stress levels will be gone from all the hassling over previous years of creditors chasing money and it is a new beginning.