In the UK an IVA is an Individual Voluntary Arrangement. An IVA is a formal agreement between you and your creditors.
An IVA is usually appropriate for someone who cannot make their regular monthly repayments, but is able to make a smaller payment after paying other expenses.
An IVA proposal details how you will repay your Creditors and usually lasts over a period of between five to six years.
An IVA could also be in the form of a lump sum. For example money you may have released from your assets.
What happens when you take out an IVA?
An IVA is something that an Insolvency Practitioner sets up on your behalf.
Companies such as Payplan and the CCCS can assist with putting you in touch with an Insolvency Practitioner.
One thing you should remember is to check how much you will be charged if you opt for an IVA. You should also find out if any payment would need to be made upfront. As you are in Debt, you might be struggling as it is. Finding more money to cover upfront fees could be difficult.
The Insolvency Practitioner you choose to help you will require quite a lot of financial information from you. All the information requested will relate to your financial situation as well as standard details.
Once the Insolvency Practitioner has this information they will calculate how much you will be able to repay.
How are Payments calculated in an IVA?
The amount you will repay will be affordable to you. The repayment will take into consideration your financial situation. This amount will then be multiplied by 60 or 72 months.
Providing you can repay a good portion of your debt, you are likely to be accepted for the IVA.
Getting Accepted for an IVA
When the plans for repayment have been made, an Interim Order may be applied for. An Interim Order will mean that your Creditors are unable to take action against you. They must first seek permission from the Court.
A meeting date will be specified and full repayment plans will be submitted to all your Creditors. The Creditors will then have the chance to vote on the repayment plans.
If 75% of your Creditors (based on the value of their debts against the total debt) agree, the IVA will then become legally binding.
Keeping on track with your IVA
It is then a case of sticking to the agreed monthly repayment amount for the specified time frame. Provided you complete your arrangement as agreed then the liabilities you have to your Creditors are discharged completely.
An Insolvency Practitioner will conduct regular reviews with you regarding your arrangement to help ensure you are able to complete it successfully.
If you are considering an IVA, ensure that you seek professional advice first. It may help you to visit the Debt Help section of this blog to see details of organisations who can help you.