What is an IVA?
An IVA may be applicable to an individual who is unable to pay all of their creditors in full or make all of the contractual payment. IVAs are generally used as an alternative to bankruptcy or another debt solution. Unlike bankruptcy an VA doesn't put any of your assets at risk, but equity in your property may be taken into consideration in the final year of the IVA. The IVA will last for five to six years and any remaining debt will be written off.
The following criteria are generally applicable to start an IVA:
- You must be unable to pay your debts as and when they fall due.
- You must live in England, Wales or Northern Ireland
- You have unsecured debts of more than £8,000
- You have at least 2 unsecured creditors
- You have a disposable income of at least £80.00, following assessment of your income and expenditure
- If you have access to a lump sum payment, you could also look to propose a Full and Final IVA without the need for monthly payments.
Choosing the right Insolvency Practitioner
MoneySave Solutions will assist you in appointing your Insolvency Practitioner, who is licensed and regulated under insolvency law to set-up and supervise the IVA.
MoneySave Solutions has a panel of independent Insolvency Practitioners who can help any clients who would like to make use of this debt solution.
It is important that you read the 'Is a Voluntary Arrangement right for me' guide, produced by R3 (The Association of Business Recovery Professionals), and there are several important points that need to be considered.
There are many advantages of an IVA which include the peace of mind that even if one or more of your creditors vote against your IVA they are still bound by it, if the majority approve your proposal (i.e. 75% of the voting creditors by value of debts represented). We recommend you read 'Options for paying off your debts' to get a better understanding of the Pros and Cons of the different debt solutions available to you.
Once approved, an IVA will stop those chasing phone calls, collection letters and legal enforcement actions from your unsecured creditors. Interest is usually frozen as long as you keep up with your payments. You should be able to continue running any business you have.
The Nominee Fee is a fixed fee and covers the Insolvency Practitioner's work in setting up your IVA proposal, convening and holding the meeting with your creditors. The nominee fee charged by our Insolvency Practitioner is likely to be in the range of £1,000 to £2,500, with an average of £1,250.
This fee will be paid out of the payments that you make into the IVA and are not additional. These payments will not be paid to your creditors. The creditors are bound by the IVA proposal once approved, provided you maintain the agreed payments to the Insolvency Practitioner.
It takes around 4 - 6 weeks to set up an IVA and during this period you will commence your monthly contributions into your IVA. It is likely that by the time the IVA is approved, you will have made one contributions which will be used as first payment into the scheme.
The supervisor's fee covers the on-going administration of the IVA, agreement of creditor claims, disbursement of contributions to your creditors and any reviews that are required, including an annual review.
If your circumstances change your supervisor has reasonable discretion to amend and review your monthly payments without going back to your creditors and this may affect the contributions and fees.
The calculation of the supervisor's costs and fees will depend on the proposal and is therefore subject to your individual circumstances. Wherever possible our Insolvency Practitioner's follows the IVA Protocol, an agreed approach with the major lenders, where the supervisor's fee will usually be 15% of your payments. This may be more for self-employed people as there is generally more complex work involved. Your creditors will agree these supervisory fees.
Once you've completed your IVA, any remaining unsecured debts are written off.
Whilst on an IVA and for a year after completing it your credit rating will be affected - an IVA may last 5 years but the effect on your credit rating will last 6 years and potentially longer if the term of your IVA is extended.
If your IVA fails, you may be made bankrupt and you remain liable for the balance of your debt and any Insolvency Practitioner fees and costs already incurred.
On completion of your IVA, it is important to ensure that all credit agreements are shown as 'satisfied' on your credit file and that the public record no longer shows your IVA. This is a major step to improving your credit worthiness. Satisfied default records on your credit file should be deleted six years from the date that the IVA was put in place with the court.
Fees are applicable if you use a licensed Insolvency Practitioner as your Nominee and IVA Supervisor and it is recommended that you seek professional debt advice from a company like MoneySave Solutions, taking consideration of all the debt solution alternatives, before signing an IVA proposal. All fees listed below are paid from your monthly contributions to your IVA, which is likely to be for 60 months. The monthly contribution is based upon your disposable income after allowing for essential household expenditure (e.g. mortgage, utilities, council tax, critical insurances) and reasonable cost of living expenses, calculated using the Common Financial Statement.
Once your appointed insolvency practitioner has completed your IVA proposal, they will issue it to your unsecured creditors. If accepted by creditors then the IVA will be approved and sent to local County Court. Your IVA proposal will include any fees applicable that are charged by the Insolvency Practitioner.
The creditor meeting will be held within 28 days of the documents going to court, and once those of your unsecured creditors that chose to vote have responded, you will start your IVA. There may be variations to the proposal requested by your creditors that may need to be considered. Our Insolvency Practitioner partners have an excellent record of getting over 96% of proposals accepted