Should you have cash anxieties and think that there’s a chance you’re insolvent, then an Individual Voluntary Arrangement (IVA) is perhaps the answer to your monetary problems. Assuming you have financial obligations and can’t make the agreed payments to your lenders you might still want to reach agreement with them to repay whatever you can afford. So long as you do have a regular income and whether or not you’ve got property such as a home or not, an IVA may help you to reach agreement with your creditors to settle some of your obligations and to have the rest written off in a sensible interval. An IVA is a structured and binding agreement to pay back a part of your debts over a limited period, ordinarily five years, though it might be for a lesser timeframe. It is binding on you and on all of your unsecured creditors. After the IVA term and so long as you have followed the IVA agreement, your complete unsecured liabilities are eliminated. These are some of the frequently asked questions about IVAs.
Do I need to include all my liabilities in my IVA proposal? Apart from secured debts such as your mortgage or your car HP, all unsecured obligations must be listed in your proposal for an IVA.
What are unsecured debts? Credit cards, personal loans, current accounts, store cards, borrowings from friends or family, arrears on utility bills such as telephone, gas or electricity, self assessment tax arrears and arrears on council tax or water charges are all examples of unsecured debts.
Must all of my creditors consent to accept my IVA proposal? No. All your unsecured creditors have the right to vote on your proposal and in reality not all unsecured lenders exercise that right. Of those that decide to vote, at least 75% of your unsecured lenders, as calculated by the amount of your debts to them, must accept your proposal for an IVA to come into being.
How about creditors who choose not to vote? They are still bound by the decision taken by the lenders who did vote.
What about the IVA being binding? All agreed on IVAs are registered with the government. The main legislation governing the formation and conduct of IVAs is dictated by the Insolvency Act (1986) in addition to some more recent legislation.
How much will I have to pay? Only what you can afford. An income and expenditure statement is prepared and included in your proposal for an IVA. Your monthly payment will normally be the difference between your earnings (what you earn plus any pensions & benefits you receive) and your expenses (your living expenses, including mortgage or rent, car HP payments and the cost of living of your dependents such as your family).
For how long will I need to make these monthly payments? The normal length of time for an IVA is five years or sixty months. However, it can be shorter than that if additional funds should become available. For example, if you should re-mortgage your house, with the prior acceptance of your unsecured lenders, thereby liberating an equity lump sum, and contribute some or all of this lump sum into your IVA, creditors could consent to reduce the duration of the IVA, enabling you to be debt-free in a reduced period of time.
What about my mortgage or car HP payments? You carry on and pay these priority bills in full as they fall due directly to your secured lenders and they are allowable expenditure items on your income and expenditure statement.
What about the costs I would sustain in an IVA? All the fees are taken from the monthly installments you make into your IVA. You have to pay nothing more yourself.
Can I get an estimate of the IVA costs? Not just an estimate. Your IVA provider has to incorporate a summary of the costs of the IVA in the proposal itself and these types of expenses will normally be set over the time-span of the IVA and should not escalate. You will therefore know up front what the charges of the process are most likely to be over the full duration of the IVA.
Where can I get advice on an IVA and what will it cost me? There are many reputable firms offering insolvency services on a commercial basis and part of that service is to provide free initial advice. There are also some charitable firms such as CCCS which are funded by creditors. Once an IVA is approved by creditors, it is supervised and administered by a licensed Insolvency Practitioner (IP). This is requirement of the law. The IP charges no fees and receives no income until the IVA is accepted by creditors. The IP’s fees then come out of the payments agreed with the creditors. If the creditors do not accept the IVA proposal, the IP receives no fees whatsoever and you, the debtor, have nothing to pay.
What alternative solutions do I have? The principal other solutions normally looked at by people with personal financial troubles are to obtain a consolidation loan or to enter into a debt management plan or to go bankrupt. It may even be possible to manage your financial problems a little differently and discover that you are not insolvent after all. In this sort of a circumstance you may well be able to control your own financial affairs yourself. Of course if you are fortuitous enough to have family or friends who are willing to provide money to make it possible for you to pay off your liabilities, then you can perhaps avoid entering into a formal or informal arrangement with your lenders.
How can I get advice on all of my options? A first step is to contact a reputable insolvency firm and ideally more than one to get good and consistent advice. Alternatively you could contact one of the charitable free advice agencies such as the CCCS or a local CAB office. You should not have to pay anything to get initial advice on your options. You will need to provide full details of your financial circumstances and following your consultation you should have a much clearer idea of what to do next. You may need several meetings to get to that point. When you are satisfied that you know and understand your options, you are free to walk away, with the benefit of the advice and without committing to anything.
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