When asking prospective clients in the UK if they
have ever been in an IVA the most common response I get is 'what's an
IVA?'
20 years ago in 1986 the insolvency act introduced the IVA. IVA stands
for Individual Voluntary Arrangement A formal, it is court ratified,
process that allows somebody struggling with unsecured debts to make a
payment proposal to their creditors.
IVA numbers are increasing dramatically at the time of writing. A
record number of people in England and Wales went insolvent between
July and September 2006. The Insolvency Service said 27,644 people went
bankrupt or entered into Individual Voluntary Arrangements to manage
their debts.
Why are IVA's proving to be 'popular'?
Creditors like them because it can often provide greater returns than
would normally be realised if the debtor went bankrupt.
Debtors like to make use of an IVA because it freezes interest on
debts, it makes the payments more manageable, it protects their home,
it is a very discreet debt solution (unlike bankruptcy) and allows
company directors to retain their position.
After a period of normally 60 monthly payments, any outstanding amounts
of unsecured debts included in the IVA are written off.
That sounds great, how do I organise an IVA?
Well initially your unsecured debts need to be in excess of £15,000. If
you have more than £15,000 of unsecured debts and are struggling with
debt repayments then it's time to talk to a professional.
Only qualified professionals can administer an IVA. This is usually an
insolvency practitioner but there are a number of firms that have
sprung up to effectively 'package' an IVA ready for the insolvency
practitioners to complete the IVA. The insolvency practitioner then
becomes the trustee for the IVA.
To get an IVA agreed, a clear statement of your financial position will
need to be drawn up. This will include all assets (house(s), cars,
endowment policies, cash plans, pension details, etc) and then details
of your monthly income and expenditure.
All these details are put to your creditors along with a proposed
monthly payment.
What about my house?
Importantly, if you own your own home, then any equity you have
available in the property will form part of the IVA proposal as part of
the repayment offer. A secured charge is applied to your property
equivalent to the proposal put to the creditors. The charge is normally
applied to your property during the first year of the IVA and normally
realised in the fourth year of the IVA.
If the property is jointly owned then only the debtors share of equity
is normally considered under the IVA.
So what happens when the creditors vote on my IVA?
The creditors vote on whether to accept the IVA proposal or not. If
more than 75% by value of unsecured creditors vote in favour of the IVA
then it has to be accepted by all the unsecured creditors.
What do you mean more than 75% by value?
Well if you have 4 creditors but say one of them is owed 76% of your
total amount of unsecured debts then it is only their vote that counts.
If they accept the IVA proposal then the others will have to accept
payments. Equally, if the 76% creditor declines the IVA proposal then
the whole proposal has been rejected.
What happens if my IVA is rejected?
Well first thing, remain calm. There is an opportunity to submit an
improved IVA proposal if your funds allow. Failing that it may be time
to consider an informal payment plan or perhaps even bankruptcy. This
is best discussed with a debt help and advice professional.
What if I miss any of my IVA payments?
A well drawn up IVA will allow for one or two missed payments in the
IVA but missing payments is a serious business. The IVA is a court
ratified agreement. Missing payments in an IVA runs the real risk that
the trustee will legally have to force you into bankruptcy.
What happens to the IVA if my circumstances alter?
If your circumstances alter then this needs to be reflected in your
IVA. That means should your income fall then the repayments should also
be reduced. Equally, where your income improves then more money will be
made available each month to your creditors.
Well I made it to the end of my IVA, what now?
The trustee will issue a 'Statement of Completion' normally within 3
months of the last payment of the IVA. The trustee will also notify the
Insolvency Service and reflect this in their records.
Finally, do be aware and get proper IVA advice.
Do sit down and get an experienced professional to go through
everything in detail. Be aware of all the factors that will affect you
if you decide to enter into an IVA. Whilst this article is accurate, it
cannot be used to replace advice from a professional organisation.
Ed Pearson is a Debt Dr. Debt Dr specialise in debt help and advice for
individuals and small businesses. Ed can be contacted on 0845 123 4000
or in confidence on 07970 659266.
http://www.debtDr.co.uk 'prescribing
life without debt'
This article does not constitute regulated advice. Please remember that
any action regarding financial advice should always be taken only after
considering the specifics of your own situation.
To find out more about Ed try, http://www.ecademy.com/account.php?id=41788
Article Source: http://www.articlesbase.com/
debt-consolidation-articles/debt-issues-welcome-to-iva-uk-79239.html About the Author
Ed Pearson is a Debt Dr. Debt Dr specialise in
debt help and advice for individuals and small businesses. Ed can be
contacted on 0845 123 4000 or in confidence on 07970 659266.
This article does not constitute regulated advice. Please remember that
any action regarding financial advice should always be taken only after
considering the specifics of your own situation. |
