Individual Voluntary Arrangement
Individual Voluntary Arrangement (IVA) Advice: Get Debt Free Life
While you are struggling to repay your debts, deciding the mode of repayment is always a difficult call to take. You may avail the free debt help or government debt help to figure out the best possible debt solution for yourself. Based on the amount of money you owe to the creditors or the value of the assets you possess, the team of citizen debt help UK may advise you to go for the Individual Voluntary Arrangement (IVA). It is mostly advised under a circumstance when the debtor may be at risk of getting their loan default.
This section will explain how the IVA UK works and when can it be the best possible way to deal with your debt crisis. You can also get an idea of what can be the benefits of opting for it and its probable drawbacks or consequences. Although IVA is only available to the citizens residing in England, Wales, or Northern Ireland. This mode of debt repayment is not available to the citizens of Scotland. For the people in Scotland, a trust deed is usually considered as the best alternative to the IVA.
An Individual Voluntary Arrangement (IVA) is a flexible formal agreement between the debtor and the creditors that are designed in a way to ensure easily affordable repayment of debts over a certain period. The IVA UK is a legally binding agreement approved by the court. Thus, the creditors are bound to stick to its provision and can’t take any legal actions against the debtors. The tenure of repayment of debt through IVA is usually around five years. One of the positive features of IVA is it allows writing off any unsecured debts. Thus, even after the period, the debtor has some unsecured debts still to be repaid, those are usually waived off.
IVA UK provides you with the liberty where you can combine existing multiple debts into a single monthly affordable payment. Thus, you need not keep track of multiple debt repayments to multiple creditors.
Although, you can’t set up an IVA all by yourself. Once you avail yourself the government debt help or other sorts of citizen debt help in the UK, you will get in touch with a financial advisor and an insolvency practitioner. The insolvency practitioner will convince the creditors to agree to the terms and conditions mentioned in your proposed IVA.
Whether you approach an insolvency practitioner you will have to pay a certain amount. Thus there is always an IVA cost involved. The insolvency practitioner is usually a solicitor or an authorized accountant. The IVA cost in the UK usually varies from around £5,000 to £8,000. The practitioner will also supervise the whole process of the IVA until the repayment period is over.
To get your IVA approved, one needs to have at least 75 percent of the creditors agree to the clauses. Once the creditors approve the proposal of IVA debt repayment, then you have to make the monthly repayment to clear your debts. The time frame of repayment may vary from one year to five years. The period of repayment usually doesn’t go beyond six years.
Usually, there is no upper or lower limit of debts that could be included under the IVA UK. But the creditors may refuse to go for IVA if the total amount of debt doesn’t exceed £10,000. Moreover, IVA is mostly advised by the team of debt help working in various financial counseling organization, only if there is a steady source of earnings.
Since you have availed the service of the insolvency practitioner to get help with debt, he will be responsible for dividing the money of your monthly repayment among the creditors. Thus, the role of the insolvency practitioner is to help both the debtors and the creditors get on to a middle ground. The debtors will pay an amount affordable by them as per their earnings and other financial commitments.
It is always a preferred way of resolving debt issues over bankruptcy as it gives more control over your assets. An IVA debt will be applicable for the following individuals:
- A sole trader or someone who runs a business with a partnership with someone and has personal or business creditors.
- the director of an organization who has personal debts and is failing to repay them in full.
Often the financial advisors from the team of citizens debt help UK will suggest the debtors opt for IVA, as it is considered the most effective alternative to bankruptcy. It is preferred because the consequences of a failed IVA debt are usually less severe than that of bankruptcy. Apart from this, several reasons make IVA a better option for repaying debts.
1. Flexibility: Based on your personal circumstances like your monthly income and other financial commitments, an IVA debt can be planned accordingly. Because of its more flexibility as compared to bankruptcy, often it is a preferred way of debt help. Usually, your personal possessions and assets like cars and other properties won’t be at stake. You will be able to repay your debts to your creditors without risking your assets. The appointed insolvency practitioner will coordinate with the creditors to ensure they agree to a monthly affordable repayment amount and your possessions are not affected.
2.No impact on the bank account: Unlike many other debt solutions, IVA UK does not demand declaring of IVA details to the bank. The debtor has the freedom to continue with his/her existing bank account. One needs not to inform the bank even if he/she opts for IVA as a mode of repayment. This is an added advantage over the bankruptcy as going bankrupt means the bank account may get closed and it gets extremely challenging to re-open another bank account after that.
3. Partial debt to be repaid: Once you have approached the team of citizen advice debt help, the financial advisor will get you in touch with the insolvency practitioner. The practitioner will convince the creditors to agree to an amount of monthly repayment affordable by you. Moreover, at the end of the tenure of the repayment, an amount of unsecured debt may be still remaining. That amount is usually waived off. Thus, a debtor has the advantage of usually end up paying a lesser amount. Along with this, the amount repaid through IVA is always less than that of bankruptcy.
4. Get debt-free at the earliest: The period of repayment for the IVA debt repayment process usually doesn’t go beyond seven years. In most cases, the period of repayment is usually between five to six years. Thus, it is assured that at the end of the repayment period, the individual will have a debt-free life.
5. No direct interaction with the creditors: Once the team of the government debt help or other free debt help services have intervened to sort your debt issues, you will get an experienced insolvency practitioner. The insolvency practitioner will then become the bridge between the debtor and all the creditors. He will be coordinating with both parties accordingly. Once the debt repayment is designed under IVA UK, the creditors will have to coordinate with the insolvency practitioner and can’t get in touch with the debtor directly. Thus, you will be relieved of their phone calls and repeated reminders.
6. Affordability: The insolvency practitioner will design the repayment plan under the IVA debt in a way so that you have to pay an amount monthly that will be affordable for you. Thus, their responsibility is to ensure a balance between your earnings, other financial commitments like rents and taxes, and the debt repayment. Another added benefit of IVA is the freezing of the contractual interest and other related charges on your unsecured debt.
The working process of an IVA involves certain steps. Even if an individual has availed the national debt help to set up his IVA, yet he/she must follow these steps. This section explains in detail the working process of the IVA UK.
Before you decide to sign up for IVA, the financial advisors of national debt help or the free debt help services will explain the details of IVA. Accordingly, you can decide whether IVA will be the best-suited option for you to cope up with your debt situation. Then you need to follow these steps:
1. Meeting the insolvency practitioner (IP): The team of debt help will arrange a meeting with an insolvency practitioner. It can either be a face-to-face meet or you can even ask for a telephonic or online video meet. The purpose of this meeting is to ensure the IP gets an overall idea about your current financial status. This helps them decide how the IVA needs to be planned for you. The IP will also explain the other alternatives like debt management plans or other types of informal debt solutions to deal with your unsecured debts. You will get an idea of what can be the legalities involved and how to proceed if the IVA gets rejected by the creditors.
2. Discuss your finances and debts: While analyzing your financial circumstances, the IP usually considers the following things:
- Monthly income
- Savings, assets and other properties
- Other financial commitments like bills and taxes
- Debts you owe
If needed, you may choose to use your assets like cars to gather more money to repay your IVA debt faster. Based on how your IVA has been planned, there is a separate clause for the home. The IP will help you figure out which assets could be kept out of the IVA. Usually, if you own an asset related to your business, like a car or a building, is not included under the IVA.
Finally, the IP will design the repayment plan. Ideally, you should be able to propose as much amount as possible for the monthly repayment. More the repayment amount better will be the chances of it getting approved by the creditors.
3. Making the IVA proposal: The IVA proposal includes various terms and conditions of the arrangement between the debtor and the creditors. Thus, it acts as a fair deal for both parties for IVA debt.
The IP will help you draft the proposal that will be sent to your creditors and submitted to the court. Through your proposal, you agree to repay the amount of debt you owe to your creditors either in part or in full over a certain period. The tenure of IVA debt usually varies between three to five years. While writing the proposal, the following points are included:
- the details of your full financial statement that includes your earnings, other expenses, and background of your financial history.
- Terms and conditions of the proposed IVA like the amount of monthly repayment, amount of debt to be paid, the period of IVA, etc.
- Reasons to convince your creditors to agree to the terms and what can be the probable options for them if you go bankrupt.
- It will also state why these have debts have got insolvent and the approaches you have made already to resolve them.
- A basic comparison between IVA and the bankruptcy and why you chose to go for IVA and what can be the probable beneficial consequences for both the parties.
- How the creditors will benefit from this mode of repayment.
4. Making the interim order: An interim order is a legal order that provides protection to the debtors while the proposal is being formulated. The order prevents the creditors from putting the debtors into legal complications. The interim order also has the provision of providing a preliminary moratorium period to the debtor by the time an IVA UK gets functional. Thus, an insolvency practitioner may file an interim order in the court to stop your creditors from taking any legal actions against you while the IVA is being set up.
Although, it depends on the circumstances and multiple other factors, whether the IP will choose to appeal for an interim order or not while he is working to help with debt. In many cases, an interim order is not even needed. Since an interim order acts as a financial shield, the creditors can’t make you bankrupt as well, and any sort of legal actions are adjourned.
Since there is a moratorium period provided, the right of forfeiture for the creditors and landlord is suspended. Following documents need to be submitted to the court to obtain the interim order:
a. The IVA proposal
b. The notice of the proposal signed by all the parties involved
c. The application for the order and a witness statement
After the application has been submitted, the nominee/ IP needs to report to the court within 14 days.
5. Meet the creditors: Once the proposal has been submitted, a meeting will be arranged with the creditors. You can only sign up for IVA debt if the creditors vote in favor of your proposal along with their claims. Your IVA proposal will only be approved if at least 75 percent of your creditors agree to your proposals and vote for them.
If the creditors wish to modify any clause and condition, they need to propose that within 14 days. Once they have agreed, a meeting is arranged.
If the creditors disagree and both the parties fail to come to a middle ground even after modifications, the IVA will be rejected.
6. Implementing IVA: Once both the debtor and the creditors have agreed to the final clauses of IVA, the IVA will be accepted. If you avail any sort of debt help, then the responsibility of the supervisor will be to supervise the whole process so that it works as per the proposal terms. A debtor account will be created, where the debtor needs to deposit the amount to be distributed among creditors. The supervisor will ensure the monthly payment is made regularly and is dispersed among the creditors as per the proposed level of dividend.
In case, the income and financial status of the debtor get better, the supervisor may ask to increase the amount of monthly repayment. The IP will send the annual report to the creditors.
7. Variation to the IVA: There may arise some unforeseen unfavorable circumstances, thus a debtor needs a variation to the terms and conditions of the IVA UK. Some of these circumstances may include:
a) They may fall into arrears.
b) The agreed amount of repayment may not be affordable for some reasons.
c) They may lose jobs for a certain period while the IVA is on.
The creditors need to agree on the terms of variation as well, else the IVA may be stopped.
8. Acceptance or rejection of proposal: If more than 75 percent of the creditors agree to the proposed IVA, it gets accepted. Then, it needs to be reported to the court. The IVA is the binding factor among all the creditors, including those who didn’t upvote the proposal.
But if less than 75 percent didn’t vote in favor, it will be rejected.
9. Failed IVA: In case there is any breach of terms mentioned in the IVA, a notice of breach will be issued. A short period is allowed for the debtor to rectify it. If the rectification is not done in due time from the debtor’s end, the supervise will terminate the IVA. In such a case, bankruptcy can be imposed.
10. Completion certificate: If the debtor has successfully completed the IVA maintaining all its terms and conditions, a certificate of completion will be issued to all the involved parties.
To opt for IVA UK as a mode of debt repayment, you need to fulfill certain eligibility criteria. The team of citizen debt help UK will help you figure out whether you will fit into these criteria or not. The criteria include:
- You have to be a resident of England, North Ireland or Wales.
- You are insolvent i.e. you fail to repay the money you owe to your creditors and the value of your debts has surpassed the value of your assets.
- You owe a minimum debt of £5000 and the value of your unsecured debt is at least £7000.
- The number of your creditors to whom you owe money should be more than 2.
- You must be able to pay a minimum amount of £80 per month as a part of your IVA debt repayment plan
- Your creditors should benefit more from the IVA plan as compared to the bankruptcy.
Although you may not fit into all these criteria, you should have most of them fulfilled. The more the criteria match, the better will be your chances of IVA getting approved.
Before you sign up for IVA, you should have a fair idea about its benefits. Although the positive or negative impact of IVA depends largely upon the individual circumstances and the team of citizens debt help the UK will explain to you those. But there are a few general benefits for choosing IVA.
- You have to make only one monthly affordable payment for all your creditors. Since the supervisor will be there to disburse the amount among the creditors as per the dividend, you don’t need to keep track of their varied repayment date and rate of interest.
- After the period of repayment is over, if there is still an amount of unsecured debt is left, that is written off. So, after the IVA period, you will be debt-free by default.
- Any sort of additional charges and rate of interest will be frozen once the IVA begins.
- Since the tenure of repayment usually lasts for 5-6 years, it is assured that you will be debt-free by then and can even be so before the end date if you pay more.
- Since it is a legally binding agreement, no creditors can take any legal actions against the debtor under IVA.
- Being a discreet debt solution, IVA has its record only on the IVA register. So, nobody except your creditors will have knowledge about the arrangements and terms mentioned in IVA. Although, your name will be added to the publicly accessible insolvency register.
- It is one of the best ways to deal with a personal loan if you are a director of a limited company. It can resolve your personal debt problems without affecting your job role.
IVA can be used to repay both secured and unsecured debts.
The unsecured debts and loans that can be paid through the IVA UK include:
- Personal loans
- Debts to family and friends
- Personal loans
- Payday loans
- Gas and electric arrears
- Credit cards
- Tax credit or benefit overpayments
- Council Tax arrears
- store card
- water arrears
- other outstanding bills
Under secured loans, mostly mortgages and rent arrears are included that could be paid through the IVA.
The amount that can be repaid through IVA varies. The amount that could be repaid and the amount that could be written off depends solely on the circumstances of the individual. As such, there is no official upper limit or lower limit for it. There are a few organizations who claim to write off as much as 90 percent of your debt. Although, this happens in extreme cases and is rather exceptional. Usually, the organizations working as a free debt help service or the team of national debt help may help you write off between 50% and 60% of average debt. It is only feasible if the amount of the average debt is not more than £60,000.
Citizen Debt Help offers free debt help to figure out which debt solution will work best for an individual struggling with a debt crisis. We have a team of a highly experienced team of financial advisors who can provide the best IVA advice. They will help you get in touch with the best insolvency practitioners with years of experience. We work in close association with highly experienced insolvency practitioners and they will help you get the maximum benefit of the IVA UK.
You can contact our team of citizens advice debt help either through telephonic call or go for a live chat online.