IVA – Clear The Debt You Can’t Afford In 60 Months
Are you facing bankruptcy? An IVA plan may be a suitable alternative.
- Write off a proportion of your debts.
- Your monthly repayments could be reduced by up to 85%.
- Interest and charges on your debts can often be frozen.
- Creditors stop contacting you directly.
- An IVA must be supervised by a licensed insolvency practitioner
- Please note that the above benefits only apply once an IVA is agreed and an interim order is granted.
What is an IVA?
An Individual Voluntary Arrangement (IVA) or Trust Deed (in Scotland) a legal alternative to bankruptcy whereby you make funds available for distribution between the creditors bound by the agreement. This usually involves making one monthly payment to your IVA or Trust Deed Supervisor for a set period of time. If you have any assets such as equity in your endowment policies etc. you may have to make some of this available to property creditors as well.
Alternative to Bankruptcy
An IVA is an alternative to bankruptcy and is suitable for people who are unable to pay their creditors in full, but can realistically afford to make reasonable monthly payments.
The amount of money demanded by creditors for these payments is negotiable, but they will usually expect to receive at least as much money from you as they would have received if you had been declared bankrupt.
As covered by the 1986 Insolvency Act, once an IVA has been agreed it offers you protection from your creditors, as long as you agree and stick to its terms and conditions.
In order to arrange an IVA you need to appoint a licensed IP (Insolvency Practitioner). Acting on your behalf, your IP will then draw up the proposal and hold a creditors meeting in order to get the proposal accepted. (Note that three quarters of your creditors in terms of your total debt will need to agree to the proposal before your IVA can proceed).
Interest & Charges Frozen
Under an IVA, all interest and charges on your debts will be frozen and your creditors will no longer contact you to demand any money or payments. Your creditors will instead have to contact your IP who administers your IVA.
The term of an IVA is usually 60 months (five years). Any amount that you have been unable to pay back by the end of this period will be written off, as long as you have kept up with your monthly repayments.
Can I apply for an IVA/Trust Deed?
If you live in England or Wales and are unable to pay your debts, you may apply for an IVA (an IVA must be supervised by a licensed insolvency practitioner), Scottish residents must apply for a Trust Deed. In general IVAs and Trust Deeds are awarded to Individuals that have over £15,000 of debt and two or more creditors. If you are already subject to a Bankruptcy Order you may still apply. If the arrangement is approved, your Bankruptcy is annulled.
What could an IVA do for me?
- Freeze all interest and charges.
- Cease any legal action.
- Stop demand letters and phone calls from irate creditors.
- Give you the peace of mind to have a fresh financial start in the long term.
- Enable an affordable monthly payment based upon your available disposable income.
- Give you your best nights sleep for a long time.
Please note that the above benefits only apply once an IVA is in force and an interim order is granted.
Additional advantages of an IVA
- There are less legal restrictions and publicity than normally accompanies bankruptcy.
- A debtor can continue to trade in a business to generate income.
- The debtor is involved in the choice of assets made available to creditors since the arrangement is designed to suit the debtor’s situation.
- Creditors can claim tax relief against bad debts.
- Creditors who vote against the IVA are still bound by it as long as the required majority (75%) in value of the creditors who have voted agree to it.
- Creditors typically recognize the benefit of accepting less than all the money owed.
Things to take note of in IVA cases
- A fee may be charged
- Fess may be deducted from initial scheme payments before they are distributed to creditors
- Entering into an IVA will affect your credit history for 6 years
- Failing to meet payments can lead to bankruptcy
- Some homeowners may be required to remortgage their home during the scheme
- Failure to meet the repayments can lead to bankruptcy
- Set up charges may be high and charges will be deducted from payments before money is distributed to creditors
- Set up charges can be lost if the IVA is not agreed
Discover more about the IVA process and if it’s right for you by contacting us now.