What is an IVA?
An IVA – Individual Voluntary Arrangement – is a legally binding arrangement with your creditors to pay all or part of your debts.
Your Insolvency Practitioner, who you agree to make regular payments to, will share this money amongst your creditors and this will allow you to regain more control over your finances.Your personal financial situation will be reviewed to assess your debt level and what you can realistically afford to pay each month.
We can refer you to one of our preferred IP’s – insolvency practitioners – if an IVA is suitable. If the formal proposal made to your creditors by your insolvency practitioner is accepted, extra charges or interest can no longer be added.
An IVA typically lasts 60 months. Providing all of your payments during this time have been made, all unpaid debt is written off.
An IVA is a debt solution available to residents of England, Wales and Northern Ireland.Benefits and Considerations of an IVA
Benefits of an IVA
- One realistic and affordable payment over a set period of time
- After successful completion of your IVA unaffordable debt is written off
- Protected Legally – After your IVA has been approved, no further action can be taken by creditors and all interest and charges are frozen
- The fees charged are taken from the affordable monthly payment you make over the agreed term of the IVA.
- Interest and charges will stop
- Support from our team who can help you through the journey
- Your expenditure will be reviewed at the start and annually to ensure your payment remains affordable - There are restrictions on the expenditure of a person who enters into an IVA
Considerations of an IVA
-Creditors don’t have to agree to an IVA proposal so it’s not guaranteed
-It affects your credit file for six years
-Your information will be held on the public insolvency register
-There are costs involved with an IVA, which are outlined in our Fees and Key information section. However, costs are deducted from the contributions you make. These will be fully explained to you and detailed fully in your IVA proposal
-If you own a property/properties, you may be asked to release equity from the value to pay off debts. A remortgage may attract higher rates of interest or, if no remortgage is available, an IVA may be extended by 12 months
-If your IVA fails, it may result in Bankruptcy
-If you earn additional income then a percentage of this may need to be paid into the IVA
-Only unsecured debts included within the individual voluntary arrangement may be discharged at the end of the period and unsecured debts not included remain outstanding
-Borrowing any amount over £500 can only be done with the express permission of the Insolvency Practitioner
What are the fees and costs in an IVA?
All IVAs have fees named Nominee, Supervisors and Disbursements but the good news is that these are included within your payment and the time frame, these are also agreed with your creditors at the outset
Typical fees are as follows:
Nominees and Disbursement Fee – £1,900
Supervisors Fee – £1,750How do the fees and costs of an IVA work?
In helping you to get an IVA, your insolvency practitioner (IP) will act as Nominee and he/she is allowed to draw a Nominee’s fee for the work entailed. Although this fee will be agreed with you, your creditors have the final say if they agree to it when they consider your IVA proposal. The fee is usually fixed and paid from realisations (the money you pay) in your IVA.
The Nominee fee is in relation to the work carried out by the IP in having to assess your financial situation and understanding all available options in deciding that an IVA is a suitable option for you. Once the IP has all the relevant information, they will prepare a proposal ready to present to your creditors to allow them to consider the IVA.
When approved, the IP then becomes the Supervisor of your IVA. Their role as a supervisor is to monitor and collect your contributions, and conduct regular reviews of your income and expenditure. Your Supervisor can seek to change or terminate the arrangement if appropriate, however ultimately, it is usual that the Supervisor will eventually conclude your IVA.
Supervisors’ fees are calculated on a monthly basis, normally as a percentage of realisations (the money you pay). This is based on the assumption that the arrangement runs for its full term and that you’ve cooperated fully. The arrangement does not have to be varied and the creditors don’t increase the amount of supervision needed in your original proposals. All of this will be discussed with you. What if my personal circumstances change during an IVA?
Any changes in your circumstances during your IVA must be reported/communicated to your IVA supervisor who will review your situation.
As well as fees, your insolvency practitioner will incur disbursements. These are the costs and expenses incurred during the setting up and administering of your IVA. Examples of disbursements are Bond (case specific insurance), postage costs, registration of the IVA and software maintenance. Some disbursements are payable in priority to fees and are always fully disclosed in your IVA proposal. These are agreed with your creditors and are drawn from the IVA. Which debts are not allowed in an IVA?
Debts not allowed in an IVA include, but are not limited to the following:
Any child maintenance arrears
Mortgage and mortgage arrears
Loans that are secured
If you still own a vehicle on car finance the finance can’t be included
Any court fines
At the meeting, creditors will consider all fees and disbursements before agreeing on the terms of them. Full disclosure will be given to you before your IVA is approved to make sure you are happy with the outcome.
What if my personal circumstances change during an IVA?
Any changes in your circumstances during your IVA must be reported/communicated to your IVA supervisor who will review your situation. What is the effect on my credit rating from my IVA?
An IVA will show on your credit file for six years. Your credit score may go down as a result of the IVA and may impact your ability to borrow additional credit. What happens to all the creditors I have?
All creditors whose debts are included in your IVA have to stop all collection & contact actions.
Can my IVA be cancelled?
You can cancel your IVA but you should consider speaking to your IP first because this is not without the possibility of other recovery actions, such as bankruptcy. Your IVA is a legally binding contract and your IP will work with you should you have a change in circumstances. Your IP does have the discretion to consider reducing your payments or even allowing a payment break.
If your IP is not able to assist you then they will normally recommend your IVA is cancelled and suggest other ways to help deal with your debts.
Why do you need my bank statements?
We need proof to show your creditors that your outgoings are factual and evidence-based.
Will my payments increase if my wages go up?
Your income and expenditure are assessed by us as a whole, therefore payments may not increase if your outgoings have also increased.