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. T