IVA
An Individual Voluntary Arrangement (IVA) can be a successful debt solution for dealing with money problems if you have a serious level of debt. It is a formal and legally binding agreement with your creditors where as debt management plans are a less formal option.
The staff at National Money are aware that people fall into money problems for various reasons. Redundancy, marriage or relationship breakdown, are just two of the causes.
We deal with every caller as an individual and each caller is assigned their own dedicated member of staff to deal with them for the lifetime of the debt solution, whether this be short or long term.
Individual Voluntary Arrangements
More formally known as an Individual Voluntary Arrangement, this is a formal, legally binding agreement between a Debtor (someone who owes money) and the person/people who have lent that money or to whom this money is owed (a Creditor).
A Proposal for an IVA is the document that sets out how the debtor proposes to deal with his/her debts, and the arrangements put forward to repay all or some of these debts to the creditors. Through such an arrangement many people find that a proportion of their debts is written off by the creditors as part of the ‘deal’.
An IVA is usually established to repay these debts over a 5 year period, though depending upon an individual’s circumstances this can vary to be shorter or longer, but tends to be no longer than 6 years at worst.
As an IVA is legally binding on all parties involved in the agreement, this has to be put in place through a licensed Insolvency Practitioner (IP), who will work with the debtor to put together a realistic Proposal for consideration by the creditors in the first instance, thereafter being responsible for ensuring that the debtor keeps to the arrangements set out in the Proposal.
A snapshot of the IVA process
Gathering information for an IVA:
With the help of our team of experts at National Money, the debtor provides the following information to form the basis of the Proposal:
- Personal information in respect of employment and family responsibilities so that we can ensure that you can maintain arrangements at a ‘reasonable’ level not just today, but for the next 5 years.
- Some understanding about how the problems have arisen – usually this involves life changing events such as redundancy, illness, divorce etc. It also helps to understand what steps you have tried so far to sort out the problem!
- A Detailed review of Income into the household, including any benefits etc received, and essential living costs. This is important as we need to ensure that you continue to cover all your necessary costs of living, and have a reasonable lifestyle, notwithstanding the IVA payment arrangements.
- A full understanding of your unsecured debts which will be included in the IVA. In this regard, this would include debts such as an overdraft at the bank, credit cards, unsecured loans, catalogue debts and loans from ‘doorstep’ lenders where payments are collected weekly by a collector. Not included in this schedule would be debts such as HP on the car, your mortgage or secured loans payments etc.
- Details about your mortgage and any other loans secured against your house, plus we’ll need to know about any HP particularly if this is paid off during the life of the IVA.
- You’ll need to tell us about any savings or assets you might have, as the creditors will want to know!
- Finally you’ll need to provide any paperwork in respect of all of your debts (statements), mortgage or tenancy agreement, salary slips/P60, bank statements etc.
Drawing up the information for an IVA proposal:
- With the benefit of all the above information, we will be able to advise you whether or not an IVA is the right route for you. There can be occasions where an IVA is right on paper, but there may be other reasons why the IVA process simply does not suit your situation.
- Assuming all is OK, we will then draw a Proposal based on the information you have given us, taking into account all of the debts, your income & expenditure, family matters and your ability to pay at an agreed level per month.
- The contributions into the IVA will usually be the figure left after deducting all your essential household costs from your average monthly income, but there may be occasions where part of the contribution comes from consideration of annual bonuses, or withdrawal of some funds from the house value if the equity in the house is significant – though you will be advised about this looks likely. Such occasions are now fairly unusual in view of the depressed housing market which has reduced house values.
- The Proposal needs to be fully understood and discussed at this stage and you will be asked to sign the documents.
Contact with creditors:
- Once you are happy with the contents of the Proposal and what this will mean for you over the next few years, we will send a copy of the Proposal to your creditors, together with any supporting schedules of information etc so that they can consider your proposals for repayment.
- The creditors will be advised of the date, time and location of the meeting of Creditors (MOC) where your Proposal will be considered.
Meeting of the creditors:
- A representative of the debtor (you!), usually the Insolvency Practitioner, will chair the Creditors’ Meeting. Ideally you will attend the Meeting, though nowadays most meetings tend to be ‘virtual’ via the telephone, so it is not mandatory.
- In order that an IVA is agreed, 75% of those creditors who vote must vote in favour of the Proposal; some may vote in favour subject to some amendments (modifications) being made to the Proposal which you need to agree.
- Once the IVA has been approved through this voting process, it is legally binding on all of the creditors, whether they chose to vote or not.
The IVA arrangement:
- Following the Meeting, a report from the Chairman of the Meeting will be sent to all of the creditors and their agents giving them the result of the Meeting and setting out detail of the votes.
- Where there have been any modifications set out by the creditors, these will be confirmed at this stage.
- Once the Meeting has been finalised, the Insolvency Practitioner takes on the responsibility to ensure that the IVA terms are implemented, the creditors are kept up to date with progress, and that you maintain the payment arrangements agreed.
- The Insolvency Practitioner will hold all contributions made by you and distribute these funds at regular intervals to the creditors, once all fees etc have been paid.
- Every year of the IVA, your income and expenditure details will be reviewed, and the IP will prepare an annual report to be sent to you and your creditors detailing progress.
- Having stuck to all the terms and conditions of the IVA, and maintained the contributions as set out, any debts included in the IVA will be cleared and you will have no further liability to them – job done!
Sounds interesting? What other important aspects do I need to know about IVAs?
- An Individual Voluntary Arrangement (IVA) is an important but not unique solution to money problems. It is immensely practical and can be highly beneficial to all parties – debtor and creditors alike – in resolving money problems in a relatively short period of time, instead of allowing matters to drag on for years without much respite for the debtor.
- It should not be confused with Bankruptcy, or Debt Management, both of which are also good debt solutions in the right circumstances but have their ‘downsides’.
- An IVA can give the debtor some very good legal protection from actions being taken by creditors to recover their money, where there is genuine hardship being experienced by the debtor. Most people take out debt at a time when they can afford the repayments, only to find some time later that through changes of their circumstances, they can no longer make ends meet. In such situations, and where there remains a reasonable monthly ‘surplus’ of income over essential living costs, an IVA could be a good solution.
- Once an IVA has been approved, all interest and creditor charges will be stopped, crystallising the debt levels.
- As long as the IVA remains in force, no further recovery actions can be taken by the unsecured creditors against the debtor.
- Approved IVAs can overturn bankruptcy orders.
- Not all creditors have to vote in favour of the IVA for the IVA to be approved – a minimum of 75% (by amount of debt) of voting creditors can approve and thus tie in all creditors. This can be helpful where some creditors consistently vote against such Proposals.
- It is critical that all terms and conditions of the IVA are carried out, as failure to do so which results in the IVA failing could render the debtor open to creditors applying for their bankruptcy. This can cause a number of difficulties where, for example the debtor is a company director or the contract of employment states that bankruptcy is a breach of the contract. The debtor could also lose their house through bankruptcy.
- Information regarding the IVA is registered on the Register of Bankruptcies and Individual Voluntary Arrangements, where it will remain for a period of 2 years after the date of either the completion or termination of the IVA. This register is available for inspection by the general public.
