IVA
Starting the IVA process can seem like a very daunting and complex process. However, we will advise you clearly on what steps need to be taken and hand-hold you through the process. As soon as you start the IVA process we will contact your creditors to take some of the pressure off you.
We have tried to outline some of the main points of an IVA below but the best way to asses whether an IVA is appropriate to you is to get professional advice. Please call us free of charge on 0800 043 2424. You can also take our debt test which may give you an idea.
If you owe more than £12,000 and earn a salary, have 2 or more unsecured creditors and have surplus monthly household income, then an IVA is often the most appropriate solution to your debt problems. For those with unsecured debts of less than £12,000 then a debt management scheme or other debt solution may well be your best option.
What is an IVA?
An IVA or Individual Voluntary Arrangement is a contract between you and your creditors. Generally you pay an agreed monthly sum, usually for 5 years. This payment is divided up between your creditors, who accept the sum in settlement of the amount you owe them and may agree to write off a percentage of your debt.
How much will I have to pay?
Your monthly payment depends on your income and expenditure and must be affordable to you. A standing order authority will be set up and your first payment must be made prior to the creditors meeting.
What kind of people enter into IVAs?
People who are struggling to pay their debts. If you are unable to pay your debts as they fall due, you are insolvent and the law gives you three alternatives - bankruptcy, Debt Relief Order or an IVA.
Are there other options?
You could get all of your creditors to reschedule your debts in a debt management program, but this may be difficult if you have a lot of creditors. Some banks and building societies have debt counselors for you to speak to. However, unlike an IVA, an informal arrangement offers no guarantees. One or more of your creditors could change their mind at a later date and make you bankrupt or charge you high rates of interest later if your circumstances improve. You may also take longer to finally clear your debt. Please take our debt test to see which option may be most suitable.
What are the advantages of an IVA?
Pay what you can afford.
We help you to calculate what you can afford and you make just one payment each month to your client account. The amount is the same over the entire period of your IVA, unless your circumstances change (but not in relation to the cost of living rise) and you can afford more. Typically, your circumstances will be reviewed once every year. Once your IVA is approved, all your creditors are legally bound by its terms, as long as you stick to your agreement. Once the agreed term of your IVA is complete (usually after 5 years), you have no further obligations to your creditors. At this point you stop paying the monthly sum and make a fresh start. Your employment will probably not be affected. Your employers will not know about your IVA unless you choose to tell them. Unlike bankruptcy, an IVA is not advertised in the local press and does not exclude you from running a business or lead to many professions terminating your employment. Please take our debt test to see which option may be most suitable.
What do I need to do?
Before your IVA proposal is put to creditors you need to sign it as a "Statement of Truth". You do not need a solicitor for this, you simply read it and sign it. We will explain any points you are unsure of. We prepare all documentation for you and contact your creditors on your behalf. A meeting of creditors will then consider your proposal. You will not usually be required to attend. In general most creditors do not attend themselves but vote by proxy instead. Even if creditors do attend, the meeting only lasts for 15-20 minutes. Someone from X-debt will chair the meeting and you need to be available by phone during this period.
What else should I know?
A bankruptcy income payment order can be over up to 3 years. The duration of an IVA is generally 5 years. However, this voluntary increase in the payment term should make your creditors sympathetic to your proposal.
Will my home be safe?
It is not usual to have to sell your property when in an IVA. If you do own your home, you will need to take reasonable measures at the end of your IVA to make any equity available to your creditors (usually by re mortgaging). This requirement is also true for bankruptcy, where normally the joint owner would have to buy your share or alternatively the property would need to be sold..
What if my creditors don't agree?
75% of votes (in value) at your creditor meeting must be in favour of your IVA proposal. Creditors can suggest modifications to your proposal and you can choose whether to accept them or not. If your creditors don't vote in favour you will still have the option of an informal arrangement with your creditors, or of bankruptcy. If some creditors do not agree but you get more than 75% voting in favour, all creditors are bound by the terms of the arrangement.
Do I have to pay any costs?
X-debt does not increase your indebtedness. Fees are taken from the agreed payments (what you can afford) into your IVA. Providing you keep to the agreement for five years, any debt you can't afford to repay will be legally written off by your creditors. You pay only the affordable monthly amount you and your creditors agree to under the terms of the IVA. Any fees for the initial arrangement and subsequent supervision of your IVA are included in the monthly payment agreed and approved with your creditors.
Please take our debt test to see which option may be most suitable.