Pondering an IVA

June 11th, 2011 | Author: Alberta Cheeks

When you have finance concerns and feel that you may possibly be insolvent, you might like to understand an Individual Voluntary Arrangement (IVA) and how an IVA could make everyday life much better. Remember that enduring cash worries alone is not all it takes to be approved for an IVA. You need to in fact be insolvent. That means that you have got to be unable to pay your debts as they fall due and that if ever you were to sell any property may already have, maybe a family home, would be likely to realize insufficient cash to settle your due debts, in spite of the assistance of your income.

So let us assume that you have debts and can’t afford to make the agreed payments to your creditors. However you do want to reach agreement with them to repay what you can afford. Provided you have a regular income, an IVA may enable you to reach agreement with creditors to repay some of your debts and to have the rest written off in a reasonable time period. An IVA is a formal and binding agreement to repay a portion of your debt over a limited term – usually five years, but it can be for a shorter period. It is binding on all parties – you and your creditors. At the end of the agreed life of the IVA, provided you have adhered to the terms and conditions of the IVA agreement, all of your debts are discharged. Here are some of the frequently asked questions.

Must I take in all my debts within my IVA offer? With the exception of secured debts such as your home loan or your car HP, all unsecured debts have to be included in your offer for an IVA.

What are unsecured debts? Credit cards, loans, current accounts, store cards, borrowings from friends or family, arrears on utility bills such as telephone, gas or electricity, self assessment tax arrears and arrears on council tax or water charges are all examples of unsecured debts.

Must all my lenders be in agreement to approve my IVA proposal? No. Every one of your unsecured creditors enjoy the right to vote on your proposal however in practice only some creditors exercise this power. Of the unsecured creditors who do exercise their right to vote, at the very least 75%, as measured by the amount of your money owed to them, must accept your proposal for an IVA to be deemed to be accepted. Secondly, the creditors who don’t vote are still bound by the course of action taken by the creditors who did vote.

What about the IVA being binding? All approved IVAs are registered with the government. The principal legislation governing the formation and conduct of IVAs is governed by the Insolvency Act (1986) as well as some additional recent laws.

How much will I have to pay into my IVA fund? Just whatever you can afford. An income and expenditure account is prepared and your monthly payment will usually be the difference between your income (what you earn plus any pensions, benefits or other unearned income that you receive) and your expenditure of money (your cost of living, which includes mortgage and car HP payments and the living expenses of your dependents such as your family members).

For how long am I going to have to make these monthly installments? The normal duration for an Individual voluntary arrangement is five years or sixty months. Having said that, it can also be shorter than that if more money should become available. For instance, if you should re-mortgage your house, with the prior authorization of your unsecured creditors, thereby releasing an equity lump sum, and offer a certain amount of or all of this lump sum to your IVA, lenders could very well consent to reduce the time period of the IVA, making it possible to be debt-free in a reduced stretch of time.

What about my mortgage or car HP payments? You will continue to pay these directly to your secured creditors and they are allowed expense items on your income and expenditure account.

What about the charges I will sustain in an IVA? The supervision charges of the IVA are taken from the monthly payments you make into your IVA. Creditors get the balance of the monthly installments you make. You need to pay nothing more yourself.

Can I get an estimate of these administration costs? Not just an estimate. Your IVA provider must include a transparent summary of the costs of the IVA in the IVA proposal itself and these will usually be fixed over the duration of the IVA or if not fixed they are easily calculated. So, you will know up front what the costs of the process will be over the full life of the IVA.

How can I get advice on an IVA and what will that cost me? There are many reputable companies offering insolvency solutions on a commercial basis and part of that program is to furnish free initial guidance. Additionally, there are some not for profit organizations such as CCCS which happen to be backed by creditors. Once an IVA is approved by lenders, it is supervised and administered by a licensed Insolvency Practitioner (IP). This is a requirement of the legislation. The IP charges no fees and receives no revenue up until the Individual voluntary arrangement is agreed on by lenders. The IP’s fees subsequently come out of the instalments agreed upon with the lenders. Whenever the creditors don’t accept the IVA proposal, the IP earns no fees at all and you, the borrower, have nothing to pay for.

What other options do I have? The main alternative options usually considered by people with personal financial problems are to obtain a consolidation loan or to enter a debt management plan or to go bankrupt. It may even be possible to manage your financial problems a little differently and you may find that you are not insolvent after all. In such a scenario you may be able to manage your own financial affairs yourself. Your IP should explain all the available options to you and indicate which are the most favourable both for you the debtor and for your creditors.

How do I get guidance on all of my options? An effective first step is to phone several respected insolvency firms (merely to make sure you are obtaining the best advice and that that guidance is consistent). Then again you could contact one of the not for profit free advice agencies such as the CCCS or a local CAB office. You should not have to pay anything to get advice on your solutions. You must give detailed information on your financial circumstances and after your deliberation you should have a significantly better idea of what direction to go next. You could need several meetings to reach that point. When you are convinced that you know and understand your options, you’re still free to leave, with the benefit of the advice. You don’t have to commit to anything at all.

Looking for legitimate debt advice ? Get exclusive inside information on how and where to find the best now in our complete guide to all you need to know about debt consolidation .

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