The Business Debt Advisor

IVAs Explained

IVAs, like many debt solutions, can be difficult to understand. If you've heard that they may be a solution out of your debt problem then this page features IVAs explained in plain English.

An IVA is a legally binding arrangement with your creditors which allows you to repay your debts in affordable monthly payments over a fixed period of time, usually five years.

Your IVA proposals are put forward to creditors in a document called a proposal, and these explain why you need an IVA. The proposals are lodged into Court and your creditors also receive a copy. If your assets are at risk because of action taken by creditors, we can apply to court for an Interim Order, which means that creditors cannot commence or continue with any action against you and your assets unless the Court permits them to do so.

A meeting of your creditors is held and creditors are able to vote on whether to accept, alter or reject your proposals - 75% of creditors must agree to the proposal.

As long as your proposal demonstrates a genuine desire to repay as much of your debt as you can afford, it is likely that creditors will accept your IVA. It is our role to guide you on what creditors will find acceptable.

Once your IVA is approved all interest and charges on your unsecured debt is frozen. If creditors accept that you can only repay a proportion of your debt, the balance of your debt will be written off as long as you keep to the terms of your agreement.

 

What happens to my home in an IVA?

If you are a homeowner, an IVA prevents creditors from taking action against you and your property. However, before the end of the IVA it may be necessary for you to introduce a sum of money into the arrangement in place of a proportion of your share of equity in your property. This is normally done by remortgaging your property. If remortgaging is not possible, you may be able to extend the arrangement for a further twelve months during which you time you pay additional contributions in place of equity.

 

The case studies and testimonials provide a number of real examples of how we have used the IVA procedure to assist clients with serious levels of debt.

*Any charges for progression of an IVA are approved up front with yourself and your creditors. Missed payments can bring your IVA to an end and could result in bankruptcy. Should your IVA fail, you will remain liable for the balance of your debt and any fees incurred by The Insolvency Practitioner. Your home is at risk if your IVA fails.

 

An IVA can bring tremendous relief from debt but it does require discipline. You will no longer be able to resort to credit and your expenditure will be assessed using either the Money Advice Trust trigger figures or the CCCS guidelines and you will need to justify expenditure which exceeds these guidelines. The disadvantages are detailed in our FAQs.

 

 

How do the IVA fees get paid?

As soon as you decide to proceed with an IVA then your payments to creditors cease and contributions towards your IVA start. These will be set at a figure which you have agreed you can afford.

The Insolvency Practitioner will charge fees for its role as the nominee and as the supervisor and a seperate fee is payable for the Insolvency Practitioner's work in each of these roles. Charges will also be made for additional expenses.

The nominee fee is a fixed fee depending on the complexity of the IVA but typically is between £1,000 and £2,000 plus VAT. This is for the pre-appointment work in setting up your proposal to your creditors.

The supervisory fees are normally capped by creditors at between 15 and 20% of realisations and are drawn monthly from the monthly contributions. This is for post-appointment work in maintaining your IVA until the IVA is concluded.

It takes around 6 - 8 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 to two contributions which will be used as part payment of the Nominees fees.

(If creditors reject the IVA proposals we do not seek to recover the balance of the Nominee’s fee from you).  All fees will be discussed in detail with you prior to any plan being put in place.

 

Does an IVA affect my credit rating?

An IVA will be on your credit record for six years which is the same length of time that any other adverse credit is recorded. 

 

Will an IVA affect my employment?

In the majority of cases, an IVA will not affect your employment. However, in certain employment areas and professionals, it is likely that an IVA will have a negative effect. Our advisors will guide you and advise you of any likely affect during your consultation.

 

The Next Step

All debt solutions should be very carefully considered; we will always provide you with the best advice to ensure you get a soft landing away from the burden of debt. Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREEPHONE ADVICE LINE 0800 085 1825 to have a full consultation with our specially trained advisors.

The Insolvency Service has produced a guide: In Debt - Dealing with your creditors, to support those who find themselves in financial difficulty during the recession.

 

Financial Information

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up and maintain your plan - all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. The Debt Advisor complies with the Consumer Credit Act and you have a right to a cooling off period of 7 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.