Starting an IVA
Who Can Use An IVA?
Anyone can consider an IVA to solve their debt problem. IVAs have been put in place for anyone from Dustbin-Men to Bank Managers, for Armed Forces personnel and members of the Police. Your ability to undertake an IVA is not defined by your job or profession. However it will depend on your personal circumstances. Normally your personal debts must be above £15,000 and you should have 4 or more different creditors. You must also be able to offer a reasonable monthly payment to your creditors. This will vary depending on the debt. However, as a minimum you will need to be able to afford at least £200/mth.
Which Debts Can Be Included?
Normally any unsecured debts can be included within an IVA. These include but are not limited to:
- Store cards
- Catalogues
- Credit cards
- Personal loans
- Student loans
- Overdrafts
- Outstanding balances after home or vehicle repossession
- Business loans for which you are personally liable
Personal debts to the Inland Revenue and VAT can also be included but may be treated preferentially within the proposal. Some debts can not be included within an IVA. These will normally secured debts such as a vehicle HP or Mortgage arrears. Other debts such as Rent and Council Tax arrears and fines (such as parking offences) will normally have to be paid and provision for the repayment of these debts will be made separately.
Contacting an Insolvency Practitioner
You can not propose an IVA to your creditors by yourself. By law, you will need the help of an Insolvency Practitioner or IP for short. For want of a better description, an IP is a special type of accountant who is licensed to carryout negotiations regarding the repayment of your debts with your creditors. There are a number of reputable Insolvency Practitioners. The best thing to do is contact them directly through their web-site. Please click on “Links” for more information.
Will I Have To Pay For This Service?
Insolvency Practitioners do not work for free. However, this does not mean that you will be facing a bill if you want to undertake an IVA. Many Insolvency Practitioners will take their fees from the money that you agree you can afford to pay each month. You will therefore not have to pay more than your agreed monthly payment. In effect, not you, but your creditors are paying the Insolvency Practitioner out of the money you agree to give them throughout the life of your arrangement.
Remember, different insolvency Practitioners have different ways of charging fees so make sure you ask how this will be done and shop around if you need to. Some Debt Management companies and IPs will offer a free home consultation. Take advantage of this offer if you can. It is a lot easier to explain your circumstances and go through your debts with someone face to face than it is trying to do everything by telephone. If you have a face to face meeting, it will also be a lot easier to get a full and accurate understanding of what you are able to afford to pay towards your creditors each month.
Actions Required
Once you have chosen an Insolvency Practitioner who has agreed to act on your behalf, you will have to go through a number of actions with them before your IVA is finally put in place. These actions normally take between 4-6 weeks to complete.
- You will first review your entire financial situation with the IP and work out how much you are able to offer your creditors.
- Then the IP will draft a formal written proposal for your creditors. This will normally detail all of your debts and the background to them. It will show how much you can afford to pay and over what period of time. You will have to agree and sign this document as being the very best offer that you can make to your creditors. Your signature will have to be witnessed by a solicitor or a commissioner for oaths.
- Your creditors will be circulated with your proposal. They may accept it without modification or request a modification to be made. No modifications to your proposal can be made without your agreement.
- A creditors meeting is held. This is an opportunity for the creditors to discuss your proposal. Your creditors may not attend the meeting but will offer their acceptance of the proposal in writing. At the meeting as long as 75% of the value of the creditors who have responded to the proposal either in writing or person accept, then the proposal becomes legally binding on all creditors.
- The court and all creditors are formally informed of the result of the meeting and the IP is normally appointed as the supervisor of the Arrangement. He/She will monitor your monthly contributions, supervise the disposal of any assets and fulfil any other requirements of the creditors
- You maintain your monthly payments into the IVA for the length of time agreed (normally 5 years). Once these and any other terms of your arrangement have been fulfilled, you will be free from your debts, and any outstanding balance will be written off.
Changes to Your Circumstances
While Within an IVA During your IVA regular reviews of your circumstances and ability to maintain your monthly payments will be undertaken by the IP. These are normally conducted once a year. If during these reviews, it is agreed that your circumstances have not changed, then you will continue to make your monthly IVA payment as normal. If however your circumstances have changed for the better, you may be asked to increase your monthly payments accordingly.
Failure to Maintain the Agreement
If you fall into difficulty and are unable to make the payments to you IVA (e.g. you loose your job or have a bad month), it is possible to agree a payment holiday with the IP. The months which you miss will normally be added to the end of the agreement. If during the period of your IVA your circumstances change for the worse (perhaps you change your job and earn less money), you may find that you cannot maintain the agreed payments. In these circumstances, the IP can ask your creditors if they will agree to vary the terms of your proposals. If up until that time, you have maintained your payments without problem, your creditors may be mindful to accept such changes. Note, if you are unable to re-start your payments at all, it is likely that the IVA will fail. Your creditors will then be able to take other action against you and alternative arrangements must be made.
IVA Guides: IVA Guides
IVA Guides: Why IVA?
IVA Guides: Starting an IVA
IVA Guides: Pros and Cons IVA
IVA Guides: FAQ
IVA Guides: Expert Advice
IVA Guides: Health Issues
IVA Guides: IVA News Articles
IVA Guides: IVA Testimonials
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| Thomas
Charles & Co - the Debt Help Specialists |
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