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1. What is an IVA?
An IVA is an Individual Voluntary Arrangement. It is a legally binding contract between you and the people that you owe money to, your creditors. It is governed by the Insolvency Act 1986. An IVA normally lasts for 5 years. During this time you pay a fixed amount per month. The money that you pay into the IVA is then divided up and paid to your creditors. The total money that you pay will be less than you owe but will be accepted in full by the people that you owe the debt to.
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2. What kind of people enter into an IVA.
If you are unable to pay your debts when they fall due then you are insolvent. In such a case you have two options open to you in law. They are bankruptcy or an IVA. The kind of people who enter into an IVA are those who cannot pay their debts when they fall due.
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3. Can I do anything else other than entering into an IVA?
Some people in your position ask their creditors to enter into informal arrangements to reduce the amount they pay. The problem that you may well face if you adopt this route is that you may take longer to pay your debt and you may in fact be charged a higher rate of interest which means you would actually owe more money than you do now.
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4. How much will I have to pay if I enter into an IVA?
This will depend upon your income and expenditure. Each case is different. However you will only pay what you can realistically afford. You will pay a fixed amount per month by standing order.
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5. Why should I choose an IVA over say bankruptcy?
With bankruptcy your details will be advertised in the local press. An IVA is not. With bankruptcy you may not be able to continue working in your present job. With an IVA your job will not be affected and your employer will not know of it. Once an IVA is approved then the people to whom you owe money are legally bound by the agreement. At the end of the IVA your obligations to your creditors are over.
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6. If I want to enter into an IVA what do I need to do?
You will need to instruct us and we will then prepare all of the necessary documentation for your approval. We will then contact creditors on your behalf and will continue to deal with them for you throughout your arrangement.
We will call a creditors meeting so that creditors can consider your proposal. You will not usually have to attend a meeting and typically most creditors do not attend in person and vote by proxy (postal vote). You can attend if you wish although a person from UK Debtsolution will chair the meeting.
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7. Will I have to sell my house?
This is a major advantage with an IVA rather than bankruptcy. With bankruptcy there may be a risk that you could lose your house. With an IVA your house will be safe however you may be asked to raise some of the equity in your house to be used to pay your creditors. We will advise you fully on this point.
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8. How much costs are involved in setting up an IVA?
At the start of an IVA we will agree our fees with your creditors. Our costs will then come from the monthly amount that you pay. If you keep to the terms of the IVA then at the end of the agreement, normally 5 years the remainder of the debt that you cannot afford will be written off by your creditors.
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9. Will the people that I owe money to agree to an IVA?
At the creditors meeting that we have described at question 6 above 75% of the votes of your creditors must be in favour of the IVA. At the meeting your creditors could suggest changes to your IVA proposal and you can then choose whether to accept them or not.
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10. Is there anything else that I should be aware of?
With an IVA you will probably pay more than if you were made bankrupt. This is because payments made under bankruptcy usually last for a shorter period than an IVA. However the effects of bankruptcy are much more severe than with an IVA.
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11. What is Bankruptcy?
Some people faced with overwhelming debts choose bankruptcy. With bankruptcy you would raise funds by selling any assets that you own – for example your house – in order to pay the people that you owe money to. There are however serious implications to being adjudged bankrupt. These include having your details advertised in the newspapers and not being able to do certain jobs.
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12. What are Debt Management Schemes?
Some people in debt choose this option. With such a scheme your debts are established in full and a payment plan is structured. However the debt that you owe will continue to grow as interest will be charged on the amount outstanding.
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13. What about Loans and Re-Mortgages?
If after discussing your situation it appears to us that the best way forward for you would be a re-mortgage then we may advise you to consider this option in order perhaps to consolidate your debts into one single payment. We may also advise you to consider a loan which is secured on your property – often referred to as a second mortgage. As with any advice that we give to you this will depend upon your individual circumstances and we will advise you on these matters only if they are in your best interests.
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