The main criteria for proposing an IVA are:
- You must be insolvent
- A regular and reliable income
- More than two lines of credit with debts over £10,000
- A surplus income (after reasonable domestic costs have been deducted but excluding regular payments to unsecured creditors)
- An attitude to commit
- You must not have proposed an IVA in the preceding 12 months or applied for an interim order in the preceding 24 months
R3, the association of Business Recovery Professionals have produced a booklet ‘Is an IVA Right For Me’ which all Insolvency Practitioners should pass to individuals making enquiries of them for an Individual Voluntary Arrangement.
What are the benefits of an IVA?
- Flexible terms, if your situation changes a variation can be proposed
- One affordable monthly repayment
- Proportion of your debt written off, in some cases up to 75%
- Creditors are bound by the terms of the Arrangement and cannot pursue you outside of the Arrangement (unless you breach the terms and the Arrangement fails)
- Pressure on you is relieved, as an Insolvency Practitioner (“IP”) will act as Supervisor of the Agreement and will communicate with your creditors
- In most cases you will retain your home, releasing up to 85% of the equity under a re-mortgage and avoiding the possibility of a forced sale in Bankruptcy
What are the disadvantages?
- The IVA will be recorded on a public record and your credit rating may be further effected
- An IVA is not permitted in some professions
- It is probable that you will need to re-mortgage your home which may attract a higher interest rate in light of credit ratings
- If you breach the terms of the Arrangement, it will fail and creditors may seek your Bankruptcy / pursue you directly.
- Your spending will be restricted for the period of the Arrangement
Initial consultation and a face to face meeting
The first step is to seek expert advice from an IP to discuss your affairs and the problems you are facing. An IP is duty bound to consider all available options before determining whether or not an IVA is appropriate. To talk to an IP please contact us on [telephone number] or complete the call back form. We are happy to arrange a free and confidential meeting at a location convenient for you.
Engage a qualified and licensed IP
In circumstances where an IVA is recommended and you choose to proceed you will need to sign an engagement letter issued by the IP. The engagement letter will set out the initial discussions and the options which have been discussed together with the advantages and disadvantages of each option. In circumstances where a request has not already been made, you will be asked to provide photographic identification and a utility bill not more than three months old to satisfy money laundering requirements. Once formally engaged the IP and their staff will take the pressure off you by dealing with pressing creditors and drafting a Proposal to them.
Duration of an IVA
An Individual Voluntary Arrangement typically lasts for a period of five years unless the contributions into the Arrangement would provide a payment in full, including interest, in a shorter period of time. Duration is discussed on a case by case basis but you should expect to be committing to the terms of an Arrangement for five years.
The IP and his/her staff will draft a Proposal to your creditors based on information provided by you regarding your assets and liabilities.
The Proposal must strike a balance and be fit, fair and feasible with a reasonable prospect of implementation. If at any point during the process you form the opinion that you will be unable to adhere to the terms which are to be proposed then it may be that the alternative of bankruptcy should be considered.
Convening a decision procedure for creditors to consider the Proposal
Once the Proposal has been agreed and signed by you, the IP will move from being an advisor, to Nominee (the person nominated by you to put forward your Proposal). As Nominee, the IP will invite your creditors to consider your Proposal under a decision procedure being a virtual meeting, via correspondence or by way of an electric vote. A physical meeting can be held if requested by 10% in value of creditor claims, 10% in number of creditors or 10 individual creditors.
Creditors are permitted to propose modifications to the Proposal which must be agreed with you. If you are unable/unwilling to accept reasonable modifications then the process will cease and you will need to revisit your other options, including bankruptcy.
The outcome of the decision procedure will be reported to creditors and to you by the Nominee within four business days of the decision date.
Post decision procedure – IVA accepted
Once the IVA has been approved you will more than likely be asked to:
- Sign a Land Registry form granting the IP, who now acts as Supervisor, a restriction against dealings in respect of your home
- Set up a standing order for contributions to commence monthly after the approval date
- Complete a monthly income and expenditure account usually annually
- Increase contributions if your income increases
End of the IVA
At the end of the IVA a final distribution will be made to your creditors and a report issued to them. The remainder of your pre-Arrangement unsecured debt will be written off (excluding any fines / student loans) and you will receive a certificate of completion for your records.
Timescale for proposing an IVA
The above process should ideally take between six and eight weeks from the initial consultation, which also factors in a 14-day cooling off period for you to consider your options. If however, an IVA is required because of creditor pressure or because a petition for bankruptcy has been presented the Proposal can be drafted in a shorter time frame, something the IP will be happy to discuss with you.