IVA

Settling Debts in an Individual Voluntary Arrangement

An essential precondition to be eligible to enter an Individual Voluntary Arrangement (IVA) is that you must first be insolvent. While there are alternative solutions for the insolvent debtor such as bankruptcy, this review will just consider the pros and cons of the IVA solution if you are unfortunate enough to find yourself in this

Can an IVA have an impact on my Mortgage?

An IVA is a professional agreement between you and your unsecured creditors to pay back some of your debts over a defined time frame – normally five years, but it could be for a lesser period.

Secured creditors expect to obtain the complete contractual repayments on their secured loans to you over the lifetime of the IVA. Should you have a home loan, you’re going to be required to make the monthly home loan repayments to your home loan provider in

Having a baby and Insolvency

Recently published statistics estimate that the cost of rearing a kid from birth to twenty one years old may very well be up to £200,000. We will assume that you are in an IVA turn out to be pregnant. The prospect of attempting to continue your IVA during your pregnancy and especially after the birth of your child might be a problematic one. The undoubted happiness of getting a new baby has got to be tempered with the inescapable fact that monetary challenges may very well escalate. Nevertheless, plenty of consumers in IVAs have skillfully overcome the difficulties presented in these particular

Buy to Let in an IVA or Bankruptcy

During the property boom which preceded the recession many people in the UK began to dip their toes in the property market in the expectation of increasing equity over a period of years which would provide them with an excellent return on their investments. Buy a property at a reasonable price, let it out for a few years with the rental income covering the mortgage and then sell it on, pocketing the profits. Hence the boom extended to what became labeled as the ‘Buy to Let’ sector. The idea was simple enough. An individual or a couple with a reasonable disposable income purchase a property and let it out to tenants. Mortgages of up to 100% were easy to come by and rents were buoyant. In practice the rental income was expected to more than cover the monthly mortgage payments. The property increased in value year by year and in due course the sale of the property would yield a nice little profit, even allowing for capital gains tax. And why stop at one property? If the idea worked with one property, why not go for two, six, twenty, a hundred or more

Three Perspectives on an IVA

The IVA process has three principal parties involved. First there is the debtor who is insolvent; secondly there are the creditors from whom the debtor has borrowed money which he (or she) cannot now repay (in full at least); finally there is the Insolvency Practitioner (IP) whose role includes acting as an honest broker between the debtor and the creditors. For an IVA to succeed, each of these three parties must work together with the others in honest and transparent

IVA – Individual Voluntary Arrangements

Debt Problems Solved

Individual Voluntary Arrangement

An Individual Voluntary Arrangement (IVA) is a way of going bankrupt without actually going the whole hog. Essentially, you come to an agreement with all your creditors about how to pay off the debts. It’s done under the supervision of a licensed Insolvency Practitioner (usually an accountant or lawyer) who usually does all the work with you and for you and, once in place, it has the force of law.

The good thing about an IVA is that it stops your creditors from knocking at your door and it enables you to have a great deal more control over how your assets are dealt with than you would with bankruptcy. It also does not affect your professional status, if you have one, although a note of the IVA will remain on your credit record for six years. The bad thing is that it all costs money to implement — and that’s money that you could have used to pay off your debts. So you should certainly shop around for the cheapest offers when you’re looking for an Insolvency Practitioner as fees vary considerably.

Also note that, in the event that you default on making payments in accordance with the agreement, your Insolvency Practitioner is obliged to petition for your bankruptcy. So, if your debts are serious enough to go the IVA route, you need to follow it through properly!

An IVA usually lasts for between two and five years, depending on how long it takes you to pay off your creditors. You will be required to account for your spending and anytime you get a pay rise, the extra money has to go towards the debts. If you have equity in your home or an endowment policy then you may be required to use these to pay off part of your debts. Your Insolvency Practitioner will help you to sort out what your assets and liabilities are, how much you need to live on and how you propose to deal with your creditors. He’ll then help you to apply to the court for an Interim Order, which puts an immediate stop to creditors taking legal action against you.

The Insolvency Practitioner then contacts all your creditors and outlines your payment proposals. This can either be done in writing or he can call a meeting of your creditors — it depends entirely on the extent of your debts and the number of creditors involved. Provided 75% (in value) of creditors agree to it (and they usually will since it means they’ll at least get some money out of you) the IVA can then be implemented.

The fees you pay to the Insolvency Practioner are normally taken out of the monthly payment you make to your creditors. Many people have concerns with the way IVAs are being promoted to those in debt, particularly by the new breed of IVA firms that advertise heavily on TV and in the press. As these firms generate large fees from IVAs, there is obviously an incentive for them to recommend this solution when it may not be in the debtor’s best interest (people on benefits being one example).

Note that there are moves to make the IVA process simpler, especially for those people who owe less than £30,000. However, the current system will be with us for a little while yet.

Source: The Insolvency Service

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What are the general criteria required for acceptance of an IVA?

The requirements for acceptance of an IVA have changed over time but generally they are now the following:

Step 1 – You have debts that are greater than £15,000

Step 2 – You have three or more different creditors.

Step 3 – You have disposable income of over £200 per month, assets to release or a 3rd party who is willing to contribute into the IVA arrangement.
You must be able to pay creditors at least 25 pence in the pound. In our experience, many IVA cases fail because payment of a decent monthly amount is not feasible.

Step 4 – You have a regular income stream as some IVA cases can fail because an applicant's income is irregular or unreliable.

Step 5 – You have been able to show that you have allowed for reasonable necessary living expenses such food, council tax, water, gas etc.

Our fully trained debt advice team are available 9.00am until 9.00pm 7 days a week on 0800 389 5959.

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Will my lifestyle change dramatically if I do an IVA?

No. Nobody will force you to change your lifestyle if you enter an IVA (providing it's not excessive). Your creditors will want to be sure you have a reasonable standard of living, and there are a series of guidelines that are in place to ensure this.br / br / However things such as a social life, lottery, and smoking are not seen by the creditors as essential living expenditures and you will be expected to live within your budget as much as possible, which is why it is essential that you cover all the normal household living expenses on your financial statement.br / br / Our fully trained debt advice team are available 9.00am until 9.00pm 7 days a week on 0800 389 5959.

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Can I keep my car with an IVA?

It's usually possible to keep possession of your car, especially if it is required for work or family reasons. However, if your car is financed in some way (for example on a Hire Purchase agreement), the outstanding balance cannot be included in the IVA because the finance company would just repossess the car. In our experience, more often than not, an IVA can take place even while you are making Hire Purchase payments. When the Hire Purchase agreement is completed, the monthly payments must become a contribution towards the IVA instead.br / br / We've found that in some cases, the best course of action is to sell the car back to the Hire Purchase finance company straightaway. If doing this leaves you with a debt to the finance company, this debt can then be included within the IVA.br / br / Our fully trained debt advice team are available 9.00am until 9.00pm 7 days a week on 0800 389 5959.

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Will my creditors agree to an IVA?

Most creditors - particularly banks, credit card and loan companies and other financial institutions are fully aware of the IVA process. If 75% of your creditors by value vote in favour of your IVA, then all creditors are bound by its terms. Creditors can suggest modifications to your proposal and you can choose whether to accept them or not. If your creditors vote against your proposal you have the option of an informal arrangement or bankruptcy. Our fully trained debt advice team are available 9.00am until 9.00pm 7 days a week on 0800 389 5959.

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