IVA Frequently Asked Questions

Q

WHAT IS AN IVA?

A

An IVA is a formal, legal agreement between you and your creditors.

Q

HOW DOES IT WORK?

A

You prepare a proposal to your creditors. An Insolvency Practitioner considers the proposal and, if he/she considers it appropriate, calls a meeting of creditors to consider it. If 75% of your creditors agree to the proposal it will be accepted. They may suggest changes to the proposal which would be discussed with you. When the terms of the arrangement are agreed by you and your creditors the arrangement is approved.

Q

WHAT IS THE PROTOCOL?

A

The Protocol is an agreement which provides a structure, approved by the major banks and credit organisations, for dealing with consumer IVAs. If Insolvency Practitioners follow the requirements of the protocol in preparing the proposal, creditors who have accepted the content of the protocol are expected to adhere to the terms.

Q

WHAT IS A PROPOSAL?

A

It is the formal document which forms the basis of your agreement with creditors.

Q

WHAT DO I HAVE TO AGREE TO?

A

The terms of the proposal will be specific to your circumstances but your creditors will expect you to pay the maximum you can afford on a monthly basis, for the duration of the IVA. For example, if your income increases by more than 10% they will expect you to increase your payments and if you receive a lump sum you should pay that into the arrangement too. If you have other assets they may have to be used for the arrangement as well; we will discuss with you how your assets can be included or excluded from the arrangement depending on your circumstances.

Q

ARE INTEREST AND CHARGES FROZEN?

A

During the IVA the creditors are required to agree to freeze all interest and charges on your debts. If you keep up your side of the agreement, whatever is left owing at the end of the IVA will be written off by your creditors. This means that you only pay back what you can afford during the term of the arrangement.

Q

WHAT IF I CAN’T AFFORD A MONTHLY PAYMENT?

A

If you do not have enough income to make monthly payments, you can still do an IVA providing you can make a one-off lump sum payment. There are a number of ways this money can be raised. For example, a friend, relative or third party may give you a gift in order to clear your debts, you could release the equity in your property or surrender a life policy. The creditors are likely to accept writing off the majority of your debt if it is clear to them this is the only solution.

In a lump sum IVA the whole process can take as little as 3 months compared with 5 years in a monthly payment IVA.

Q

HOW LONG DOES IT TAKE TO GET CREDITORS TO AGREE?

A

An IVA can be agreed and in place in less than 6 weeks. For you this will mean a suspension of all legal action, no further worrying phone calls or being chased by debt collection agencies.

Q

WHAT DO YOU NEED TO PREPARE A PROPOSAL?

A

Setting up an IVA is a simple process; most of the work is carried out by us. We will deal directly with your creditors. The process entails a number of steps:

  1. You are referred to us, or can apply directly to us, and we request some basic information from you. If we’re able to help you we will then either set up a meeting with you or continue to communicate by phone or email, whichever suits you best. During this process we will confirm whether or not an IVA is the right option for you.
  2. We will then ask you to provide us with documentary evidence concerning your debts, monthly income and expenditure, any assets etc. We have to give a clear summary of your financial situation for the creditors.
  3. When we have all the information, we will draft your IVA proposal (your offer to the creditors). This is a legal document and includes your background information and the details of your offer, in addition to further information about the administration of the arrangement.
  4. You then approve and sign the IVA Proposal documents. The Insolvency Practitioner will consider them to ensure that your offer is fair to both you and your creditors. The Insolvency Practitioner will also prepare a report which is sent to your creditors with your proposal.
  5. At the same time the Insolvency Practitioner will arrange a meeting date for your creditors to vote on your proposal. You will not usually be expected to attend the meeting although you must be available.

Q

HOW MUCH WILL I HAVE TO PAY TO SET UP IVA?

A

We do not charge you a fee for the help and advice before your IVA is approved by your creditors, however, we can’t work for free! The proposal will specify the amount to be paid to the Insolvency Practitioner whilst appointed as Nominee and Supervisor of your arrangement. These fees have to be approved by your creditors because they are taken from the amount paid into the arrangement and hence reduce the amount that your creditors will get. The creditors understand and accept this. For you this means that once your arrangement is approved, you only pay the regular payments you have agreed to.

The fees that creditors usually require are £1000 for the nominee’s fee and 15% of the total amount paid into the arrangement for the supervisor’s fee.

Q

WHAT HAPPENS TO MY HOME IN AN IVA?

A

In a bankruptcy it is possible that you will be forced to sell your home. This isn’t the case with an IVA unless you choose to do so. However, if there is equity available in the property (the money that, in theory, would be left over if the property was sold after paying any outstanding mortgage and secured debts held against the property) the creditors would expect you to try to use some of this to pay them. However, they would not expect you to sell your house.

Q

WHAT IF ONE OF MY CREDITORS DOESN'T AGREE TO LET ME HAVE AN IVA?

A

Not all of them have to agree. Providing 75% - by value - of the creditors who vote agree, the rest will also be bound by the agreement. However, if a creditor has not been told about your arrangement they have the right to object to the approval. Therefore, it is important that you tell us about all of your creditors.

Q

CAN AN IVA BE SETTLED EARLY?

A

Yes - if your financial circumstances change so that you can give your creditors a better offer, we may be able to hold a variation meeting to make that offer to your creditors.

Q

CAN I STILL HAVE A BANK ACCOUNT IF I HAVE AN IVA?

A

Yes - however, you will need to ensure that the account is not with a bank that you already owe money to.

Q

WHAT ABOUT THE IMPACT TO MY CREDIT FILE?

A

Credit reference agencies will record the existence of your IVA at the start of the arrangement. It will then stay on your credit record for a minimum of 6 years or until the arrangement is completed if that is longer.

Q

WHAT IS AN INSOLVENCY PRACTITIONER?

A

An Insolvency Practitioner is a licensed specialist. The law requires an Insolvency Practitioner to be involved in the IVA process. The work of the Insolvency Practitioner may be delegated to experienced members of staff.

Q

WHAT DOES THE INSOLVENCY PRACTITIONER DO?

A

The insolvency practitioner has 3 roles

  • Initial advisor: Helping you to consider your options to find the best solution to your financial difficulties. The Insolvency Practitioner will also help you to prepare the IVA proposal if this is the right option for you.
  • Nominee: The law requires an Insolvency Practitioner to assess and report to creditors on your proposal. At this stage the Insolvency Practitioner must act independently to consider whether the proposal is fair to you and your creditors.
  • Supervisor: When the arrangement has been agreed between you and your creditors, the Insolvency Practitioner’s job is to oversee the arrangement until it is completed. The duties of the Supervisor will be specified in your arrangement.

Q

CAN I GET FREE DEBT ADVICE?

A

Yes – there are several sources of free debt advice available to all consumers. For further information please visit www.moneyadviceservice.org.uk. The Money Advice Service is a free and impartial service set up by the government to help people to manage their money.

Q

WHAT IF I CHANGE MY MIND?

A

An IVA is a serious commitment to your creditors. If you stick with it for the duration of the term, your creditors will write off your debt. If, during the course of your arrangement, you change your mind and/or do not keep to your side of the agreement it will break down and you will revert to your original position of dealing with your creditors on your own.

Q

WHAT IF MY CIRCUMSTANCES CHANGE?

A

During the course of the IVA we will stay in touch with you. If you find that you are no longer able to make payments, we will try to help you find a solution with your creditors. Whilst the terms of the IVA are quite strict you are allowed a payment break of up to 6 months if your circumstances are such that you cannot make payments. Your supervisor may also be able to agree to a reduction in your payments if your circumstances require it.

Q

WILL I BE CONTACTED BY MY CREDITORS?

A

We aim to contact your creditors as soon as we get your signed Authority to Act, to notify them that we are working on your behalf. This should contribute towards reducing creditor contact, however, you may still receive some contact in the early stages of the IVA process.

Do not ignore the calls; please be polite and notify them that you have now appointed Angel Advance to act on your behalf. Remember, it is our job to deal with your creditors. Therefore we ask that you forward any letters or statements that you receive to us using the pre-paid envelopes we provide.