What is an Individual Voluntary Arrangement (IVA)?
An IVA is a legally binding agreement between you (the debtor) and your creditors (people you owe money to). It is available to any individual who cannot pay his or her debts, and applies to both business people or people who have got into problems with unsecured debt from credit cards, loans and store cards. They often involve an agreement to pay a fixed monthly sum to the Insolvency Practitioner who acts as a Supervisor. The Supervisor will then distribute these funds to your creditors. Unlike debt management plans the IVA is normally in full and final settlement of all debts. IVAs generally last for a period of between one and five years.
Will I be Charged any upfront fees? How are those fees agreed?
Not by Lines Henry. We offer free debt advice for all IVAs be they related to consumer credit or business debt or both. If we think an IVA is the best option for you we will advise you of that. You make the decision. The fee we receive for preparing the Proposal to creditors and then supervising it has to be agreed with your creditors and comes out of the funds paid into the IVA. Part of our IVA process is to carry out an analysis of your income and expenditure before advising you on the level of contributions you will be expected to make. This information is used to prepare a Proposal (which must comply with legislation), which sets out all of our proposed fees. It is this document that you and your creditors have to agree.
Is there a quick guideline to assess whether or not an IVA is the right approach?
There are a number of factors to take into account. Generally, however, if the answer to the following four questions is yes, an IVA is something you should consider.
- Do you own your own home?
- Do you have unsecured debts of more than £20,000?
- Do you earn more than £15,000 per annum?
- Are you currently paying unsecured creditors, i.e. credit cards/store cards more than £300 per month?
If this applies to you call Lines Henry on free phone 0800 012 6649 for a free consultation.
An IVA may not be appropriate for you if:
- You do not own your own home
- Your main source of income is State Benefit
- You currently have less than £200 per month available to pay to your unsecured creditors once you have taken into account all of your reasonable living expenses.
Even if you consider that you fall into the above category there are other solutions that may be more appropriate for you.
Lines Henry will provide you with free advice on any IVA Problem. Please call on free phone 0800 012 6649.
What does the IVA do?
Once approved by your creditors the IVA will stop further interest accruing on your unsecured debts. Instead of having to deal with your creditors individually, you will have one agreed monthly sum that you know you can afford to pay. Creditors who have previously been pursuing you will be bound into the IVA. The way to a successful IVA is through a Proposal with an affordable monthly payment that is fair to you and your creditors.
Would I have to pay back my creditors in full?
In most cases no. The purpose of the IVA is to reach a full and final settlement over an agreed period, usually one to five years. The amount that you pay each month is dependent on your income and normal outgoings. In your formal Proposal to your creditors you are required to disclose to them your full and true financial position. Creditors are realistic. If they know that there is not enough money to pay them back in full then they will normally agree to the IVA.
Does an IVA protect my house?
The IVA will deal with your unsecured creditors. Most people have a mortgage on their home. The bank or building society take a Charge on the home to protect their position. They are known as secured creditors. The main reason debtors choose an IVA as opposed to Bankruptcy is to protect their home. The IVA Proposal will make provision to pay the secured creditors in the normal way throughout the period of the Arrangement. When calculating the amount that you have available for your creditors, the mortgage repayments are always taken into account. Even if you have mortgage debt problems, an IVA may still be possible. However, if you do not pay your mortgage then an IVA will not protect you from any action the mortgage company may decide to take under their Charge.
Failure to keep up payments in an Individual Voluntary Arrangement may result in you being declared Bankrupt. Your ability to obtain credit will be affected for six years by entering into such Arrangement. If you own a property you may be required to re-mortgage it after four years to release any available equity.
For more information on an IVA contact Lines Henry on free phone 0800 012 6649.