IVA solutions from a leading UK debt specialist

An IVA is a legally binding agreement, backed by Government legislation, that could help you clear your debts and avoid the consequences of bankruptcy. As a licensed Insolvency Practitioner, Debt Advisers Direct can provide free IVA advice.

With an IVA you could:

• Only pay back the debts you can afford
• Prevent or stop legal action - including bankruptcy
• Benefit from government legislation that helps clear debts
• Pay back an agreed, fixed amount each month within a fixed period (normally 60 months)
• Get total protection from all of your creditors
• Freeze interest and charges

IVA solutions from a leading UK debt specialist

An IVA is a legally binding agreement, backed by Government legislation, that could help you clear your debts and avoid the consequences of bankruptcy. As a licensed Insolvency Practitioner, Debt Advisers Direct can provide free IVA advice.

With an IVA you could:

• Only pay back the debts you can afford
• Prevent or stop legal action - including bankruptcy
• Benefit from government legislation that helps clear debts
• Pay back an agreed, fixed amount each month within a fixed period (normally 60 months)
• Get total protection from all of your creditors
• Freeze interest and charges

IVA: What happens at the creditors meeting?

28 March 2008

Before an IVA (Individual Voluntary Arrangement) can ‘start’, it must be accepted at a creditors meeting. A brief explanation:

Before the meeting

Once the Insolvency Practitioner (IP) has drawn up the IVA proposal and the individual is happy with it, the IP will get in touch with the creditors to tell them when the meeting will take place. They must be given at least 17 days’ notice.

The IP will send them a copy of the proposal, along with details of the individual’s income and expenditure, so they can see for themselves whether the proposal is a realistic reflection of what they can afford to pay.

At the meeting

In practice, few creditors actually attend a creditors meeting; it is more common to conduct a ‘paper meeting’ where votes are made by e-mail or fax, stating whether they accept the proposal, reject it, or request changes to it. Similarly, there’s no need for the individual to attend the meeting in person. However, they must be contactable by telephone, in case any creditors request changes to the proposal.

The IP, the individual or one of the creditors can ask for the meeting to be adjourned for up to 14 days, if they need time to collect votes or consider any changes requested to the proposal.

Accepted or rejected?

For the IVA to go ahead, it must be accepted by creditors who are owed at least 75% of the total debt between them.

An example. The individual owes a total of £40,000 to the following five creditors:

Creditor B ‘owns’ half of the debt, so

• if Creditor B (50%) accepts the proposal, it would still need to be accepted either:
  1. by Creditor D (25%) or
  2. by Creditors A, C and E (12.5% + 5% + 7.5% = 25%).

• if Creditor B rejects the proposal, there’s no way it can be accepted – the votes of the other four only add up to 50% between them.

Like to know more? Click here for a 60-second guide to IVAs.

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Variation of an IVA

20 March 2008

Five years is a long time. When someone signs up to an IVA (Individual Voluntary Arrangement), they can’t know what the future holds, and creditors understand this. So although anyone in an IVA is required to follow the rules laid down in the agreement, those rules aren’t set in stone.

Before the IP writes the original IVA proposal, they always take a good look at any changes that might happen the over the next five years. But life is full of surprises – and sometimes, something happens that no-one expected. If it’s a big change, the person might need to ask for a ‘variation’ of their IVA: a legal process that’s used to change the existing arrangement.

Unexpected events

Most creditors will consider reasonable changes to the IVA if it’s the best way of handling some unexpected event like a change of job, a pregnancy or a divorce.

They might also accept a new agreement if the person comes into a lump sum of money which lets them make a ‘full and final’ settlement that brings the IVA to an early (but successful) finish.

How does it work?

The job of an Insolvency Practitioner (IP) isn’t over when the original IVA is accepted by creditors. All the way through the IVA, they’re there to supervise the arrangement, handle issues that might come up – and if necessary, propose a variation.

So if someone’s circumstances change drastically, they can ask the IP to create a new proposal detailing the changes they’d like to make to the IVA (for example, they might ask to pay arrears at the end of the five-year period, so the IVA basically runs a bit longer).

As with the original IVA proposal, the report is sent to the creditors, who have the right to accept it, reject it or request changes to it.

If it’s accepted, the IVA can continue under the new terms.

If it’s rejected, the person has a choice to make. They can either carry on with the IVA under the original terms or opt for an alternative such as bankruptcy or a debt management plan.

An important part of IVAs

Some people think of IVAs as inflexible and uncompromising, but it’s important to realise there’s room for some ‘give and take’. If someone runs into problems 3 years into an IVA, they’ve already put a lot of effort into it, and so have the IP and the creditors – it’s in no-one’s interests to let it fail.

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A 60-second guide to IVAs

(Individual Voluntary Arrangements)

14 February 2008

An alternative to bankruptcy, an IVA is a legally binding formal agreement that helps people write off unsecured debt that they cannot afford to repay. In return, they have to pay a fixed amount every month for (normally) 5 years, based on the maximum they can afford after they’ve paid for mortgage / rent, food, utilities, etc.

Normally, people can only enter into an IVA if they have £15,000 or more of unsecured debt which they can’t afford to pay back – and if they have a reliable income.

An IVA works like this:

1) The person in debt talks to an Insolvency Practitioner (IP). If the IP thinks that an IVA is their best option, they work together to draw up a proposal telling the creditors how much they would receive if the IVA went ahead.

2) For the IVA to get started, the proposal must be approved by creditors who collectively ‘own’ 75% of the debt – so it must show that the IVA would bring them more than (for example) bankruptcy.

3) The person then makes the agreed repayment every month – normally, for 5 years. Their creditors stop charging interest and stop (or promise not to start) any legal action against them.

4) If the person is a homeowner, they’ll probably have to free up some of the equity in their home in the 4th year of the IVA to pay to their creditors.

5) The IVA can fail if the person misses 3 payments – but if they keep up the payments for 5 years, the IVA comes to a successful conclusion. The creditors write off the rest of the debt, and the person becomes officially debt free (apart from any secured debt / any unsecured debt that wasn’t included in the IVA).

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