IVA & Debt Management Frequently Asked Questions (FAQ)
Why Use an IVA?
An Individual Voluntary Arrangement ( IVA ) is an agreement with your creditors to make a single reduced payment each month. This lasts for an agreed period of time (less than 5 years). Once agreed, creditors are not allowed to add interest or charges to your accounts by law. The agreement is fixed meaning that creditors cannot randomly demand changes to it.
An Insolvency Practitioner (IP) can only put IVAs together. We will need to ask you a number of questions about your financial situation in order to calculate how much you can realistically pay your creditors each month. This is based on what you can afford, not what creditors are asking for.
Once proposals for repayment have been drawn up, an Interim Order is applied for. Whilst the Interim Order is in place, your creditors cannot take action against you without asking the Court.
A meeting date will be arranged and full proposals sent to all creditors who will then have the opportunity to vote on them. If enough of your creditors (75% in value) agree, the IVA will become legally binding. You then make agreed payments for a number of years (less than five) and providing you have completed your Arrangement as agreed and once the final payment is made, your liabilities to your creditors are discharged in full. Many Insolvency Practitioners will normally charge you an upfront fee for putting together the Arrangement. WE DON'T
Our practitioners work within the guidlines of R3 and as part of the Association of Business Recovery Professionals.
Can an IVA be settled early?
Yes, we can convene a variation meeting to offer a sum of money in full and final settlement of your obligations under the IVA. The sum of money could be raised by:
- Remortgaging your property
- Funds from a relative
- Cash in policies (Subject to getting you expert investment advice)
A great number of IVAs end early with the introduction of a lump sum of money. Creditors do support early settlements as they generally prefer to receive their money early than wait for payments over a five year period.
Can I protect my home?
Outside of an IVA, creditors can obtain judgements and then onto obtaining charging orders against your property. They can also petition for your bankruptcy which will mean that your property is at risk. An Interim order application can stop these actions in the period prior to the creditors' meeting. Once your IVA has been approved, creditors cannot take any further action against you.
An IVA covers all debts
Whether your debts relate to amounts due on loans, credit cards, trading debts such as Self Assessment or Tax ,amounts due to suppliers as well as council tax and utilities, an IVA will bind all these creditors to your one monthly payment arrangement.
What are the advantages of an IVA?
- You only make one affordable payment per month
- As long as you keep to the terms of your IVA, once it is approved, all of your creditors who are entitled to vote are legally bound. They cannot take further action against you or change their minds at a later date
- From the date of approval, all interest and charges are frozen
- This is a private agreement between you and your creditors. It IS NOT advertised in the local papers.
- The IVA will not affect your professional status or your ability to hold public office.
What is an example of an IVA?
Mrs Smith has a total debt of £25.000. She has 5 credit cards 2 loans and an Overdraft with her Bank. She has a car on H.P. and needs this to travel to work / pick up kids from school.
Mrs Smith pays out £410.00 per month leaving her with a growing overdraft. Her outgoings leave her with no money at the end of the month.
We work out she can pay £220.00 per month for 3 years and £300.00 in years 4 & 5 as the car H.P ends in 36 months.
Mrs Smith pays £14,400 over 60 months and is now debt free. She keeps the car and still has a Bank account. She is now £300 better off per month and has no debt.
Don't be fooled by companies that say they can 'write off' upto 95% of your debt. This is not true. Maximum 'write off' is 75%. The claim of 95% is a one off case and not normal in insolvency.
Fast Track Individual Voluntary Arrangements (F.T.V.A.)
If you have been made bankrupt it is still possible to have a form of IVA called a "Fast Track Individual Voluntary Arrangement" which means the bankruptcy order can be annulled. You put forward a payment proposal to your creditors that would mean they will be paid more than they would under your bankruptcy. The Official Receiver runs the F.T.V.A. for you if they agree with your proposal. The F.T.V.A. is cheaper than an ordinary IVA as there are set fess and costs. If it fails then your creditors could try to make you bankrupt again.
Why Not Debt Management?
Although Debt Management may greatly reduce your repayments each month, you will still have to pay all of your debt back. This could take a little longer than the IVA. For example, if you owe £20,000 and reduce your monthly repayments to £250/mth based on what you CAN afford to pay, you will be repaying your debt for at least 7 years. You can however change your payments during the plan. Under the IVA, you will be debt free in 5 years or less.
How Do I Apply?
To Be Debt Free in 5 Years or less, call us today on 0800 389 6339 or fill out the 'Call Back' form on this page or Apply Online.
Don't forget we don't charge a Upfront Fee in IV
