Free IVA Advice: Individual Voluntary Arrangement (IVAs) Procedure
65What is an IVA?
An IVA is a legally binding method to lower the total amount that you repay to your creditors subject to their agreement (75% of them have to agree to this).
It is a method of reducing your monthly repayments to a level that you can afford.
How Much Will an IVA Cost?
An IVA is a means of reducing your monthly repayments of your overall unmanageable debts (subject to the agreement of your creditors – 75% of them have to agree to this). When you request an IVA proposal to your creditors, you offer to repay a percentage of the overall debt via monthly installments.
The total amount that you suggest to be repaid monthly is based on what you can afford to pay. An Insolvency Practitioner will get involved to help you work out a realistic repayable sum.
This obviously means that not all IVAs are the same and they are assessed on a very individual basis – depending on your overall assets and assessed on how much disposable income is left after all living expenses have been deducted from the monthly income sum.
There is often a minimum percentage that creditors are prepared to accept as part of the IVA proposal. They are highly unlikely to accept any IVA proposal offering them less than 20-25% of the original debt.
If you set up and IVA and stick to the terms of the IVA, then you can continue to run your business with complete control and without any outside input or involvement.
When the IVA process is finalized, you will then receive a Statement of Completion from the IVA supervisor. This usually happens within 3 months of the final payment. The Insolvency Service is then sent a copy of this statement for their records.
If you default on your payments and thus fail to meet the terms of your Individual Voluntary Agreement, then the supervisor of the IVA can commence bankruptcy proceedings against you.
It is possible to set up an Individual Voluntary Agreement if the Bankruptcy hearing has yet to take place. The Insolvency Practitioner can potentially issue an Interim Order to postpone the proceedings whilst the IVA proposal is being set up and sanctioned. Whilst this process is taking place, the costs of setting up an IVA have to be taken into account in addition to the bankruptcy costs.
As an Individual Voluntary Agreement is set up instead of a bankruptcy order, the IVA has different conditions to a bankruptcy order. Unlike with bankruptcy, if you manage to set up an IVA, you will not be forced to sell your home. However, it is possible that you will be expected to release some of the equity in your home in order to pay your creditors.
Again, if you own other valuable assets, these will be assessed individually. If you own your own car, it is quite possible that you can keep it, as you need it to travel to your place of work.
Expenditure, such as smoking or an extravagant lifestyle are not deemed as essential living expenditure, and creditors are only likely to be in favour of the IVA if your living expenses are realistic and considered the norm and are included in your financial statement.
It is possible to complete your IVA earlier than originally agreed if you inherit or win lottery money for example. Your Insolvency Practitioner will then need to meet with your creditors to ensure an early lump settlement is approved. Generally, the majority of creditors are happy to agree to this, as it means that they are paid earlier than the terms of the IVA.
If you fail to keep up the monthly repayment installments then your Individual Voluntary Agreement will fail. For this reason it is of utmost importance to be realistic in listing every possible expense that you incur in order to set the IVA up correctly.
If you lose your income or your job, then this can result in a failed IVA. If, at any point throughout the IVA, your financial situation alters, then you are legally bound to contact your Insolvency Practitioner to discuss your available options. They will make suggestions accordingly in an attempt to rectify the situation for all concerned.
