How Does an IVA Work
In order to apply for an IVA you need a Licensed Insolvency Practitioner (which is a little like a solicitor but specifically for personal Insolvency). The insolvency practitioner and their highly trained team will assist you in preparing a proposal of repayment to your creditors and negotiating the terms with them.
An IVA can be broken down in to 5 easy steps.
Step 1 – IVA qualification
Firstly we would need to conduct an assessment of your situation to confirm 2 simple things:
- How much you can afford to pay
- That an IVA is a suitable solution for your own Individual circumstances.
If you have an affordable payment and the IVA is suitable and you are happy to proceed you will progress to step 2.
Step 2 – Proposal Assessment and Preparation
A review is then completed by one of our trained IVA Drafters who will work with you in line with our regulations to help put together an accurate reflection of your circumstances and offer of repayment to your creditors. The drafter will used approved guidelines to calculate what you need in order to pay your household bills and other living expenses, to ensure you can demonstrate to your creditors that the amount you are offering to pay towards debts is as much as you can afford to repay and more importantly is reasonable, sustainable and provides you with an acceptable standard of living whilst subject to the IVA.
At this stage, you will also be provided with information on any alternative options to the IVA, to ensure you can make an informed decision that the IVA is right for you.
You will be asked to review the proposal and its contents before signing it and your Drafter will answer any questions and support you as much as you need.
Step 3 – Issuing the proposal to your creditors
Once you have reviewed the Proposal and signed and returned it to us, we will submit a copy to all of your creditors who will be given notice of a “Meeting of Creditors” (although it is called a meeting they rarely meet in person) They will be requested to vote by the day of the Meeting which they will usually do using voting forms by post, email or fax. Providing a 75% in value of debt majority vote in favour your IVA is approved and all creditors are bound by its terms. This includes those creditors that did not vote or voted against.
Step 4 – Supervising your IVA
Throughout your IVA our Insolvency Practitioner and trained Supervision Team will manage your case and the fund in to which you make your IVA payments. They will deal directly with all of your creditors on your behalf and will use the payments you make in to the fund to distribute payments to your creditors as well as recover fees and expenses in accordance with the terms agreed by you and your creditors.
The Supervision team will be on hand to support you whenever you need them and will conduct regular reviews of the Arrangement with you to ensure you can continue to fulfil you obligations and complete your IVA successfully.
They will also issue annual reports to your creditors detailing the performance of the IVA and any amendments made due to changes in your circumstances.
If any long term circumstance changes occur it may be required that your Supervisor seeks permission from your creditors to amend the terms of the Arrangement where they don’t have discretion to do so. This is conducted through a Variation meeting that follows a similar process to that of the initial Meeting of Creditors.
It is important to note that there is always something we can do to help if you suffer a change in circumstance and our Supervision Team and Insolvency Practitioner will be on hand to support you every step of the way.
Step 5 – Completion of your IVA
When your IVA is successfully completed our Supervisory Team will commence preparing the necessary instructions to your creditors to confirm the IVA has completed successfully, whatever unsecured debt remains is then written off by your creditors.
Subject to eligibility and acceptance. Fees Payable. Debt write off applies to unsecured debts only and on successful completion of an IVA. If your IVA fails, it could lead to Bankruptcy, although this is rare and alternatives may be available. Your ability to obtain credit will be affected for the medium to long term. Homeowners may be required to release equity in their property, subject to certain criteria. If unable to release equity and equity is available an additional 12 months payments may be requested in compensation.
Financial Support Systems provides insolvency solutions to individuals, specialising in IVAs. We do not administer or provide advice relating to debt management products, such as Debt Management Plans. Advice and information on alternative options will be provided following an initial fact find where the individual(s) concerned meets the criteria for an IVA and wishes to pursue it further, as governed by our Insolvency Practitioners' regulators, the Institute of Chartered Accountants in England and Wales. All advice given on any alternative options is therefore provided in reasonable contemplation of an insolvency appointment.
The Money Advice Service is a free service set up by the Government to help people make the most of their money. If you would like to learn more click here.
The Association of Business Recovery Professional, known as R3, produce a booklet called "Dealing with money worries - A guide to your options". This is a very helpful summary of the various options for dealing with debt and a copy can be found at the following link. Please also see link to 'Voluntary Arrangements - A Guide for Creditors on Insolvency Practitioner Fees'.