What is an IVA?
An IVA is an agreement between you and your creditors and it will protect you against any further action from your creditors providing that you stick to your side of the agreement. An IVA must be supervised by an authorised Insolvency Practitioner.
The majority of IVAs are based on a monthly amount of money being paid into the IVA from your future income but some IVAs include other money such as money from family or compensation from mis-sold Payment Protection Insurance “PPI”.
Some IVAs, especially when there is little or no surplus income, are only based on lump sum payments into the IVA in full settlement of all debts.
The money paid into the IVA will firstly be used to pay the set up costs of the IVA and then the ongoing costs of administering the IVA and the remaining surplus money will be paid to creditors on a regular basis.
The agreement offered to creditors, called a Proposal, will state that if the creditors agree to accept the IVA, then at the end of the IVA period, any debts that remain unpaid will be written off.
Duration of the IVA
An IVA typically last for 5 years if the only money to be paid into the IVA is from your future income.
The IVA could be much shorter than 5 years if there are additional lump sum amounts to be paid into the IVA but in some circumstances it could be extended, usually to 6 years.
Who Can Do an IVA?
An IVA may be appropriate if you are employed, self-employed, a sole trader or in receipt of a pension.
You will need to have sufficient income to pay all of your living expenses and have a surplus amount that you can comfortably pay into an IVA.
The starting point of any debt solution is to make an assessment of your personal circumstances, obtain details of your assets and liabilities and produce an accurate account of your income and expenditure.
We will then clearly explain the different options that are available to you to resolve your financial difficulties, which may include an IVA.
We provide straightforward, unbiased advice and a full explanation of both the benefits and drawbacks of the different solutions so that there are no unknowns or surprises.
There are no fees or other expenses for you to pay up to this stage and no obligation on you to enter into an IVA or any other debt solution.
The Next Stage
If an IVA is appropriate for you, and you decide to instruct Newton Cooper, we will draft the Proposal to put before your creditors which will include details of all of your assets and liabilities and your monthly income and expenses.
Your creditors will then be asked to vote for the acceptance of the IVA and, from those creditors that actually submit a vote, the IVA will be accepted if the creditors that agree are owed at least 75% of the vote value. The IVA will then apply to all your creditors, including any who disagreed to it.
Creditors may ask for modifications to the Proposal before they will accept the IVA such as a slightly increased monthly payment or an increased duration but these modifications cannot be accepted without your agreement.
Each of these modifications will clearly be explained to you and you will be advised whether your failure to agree to any proposed modification will mean that your IVA will not be accepted.
After the IVA has been Accepted
Once the IVA has been approved an insolvency practitioner(s) from Newton Cooper will become the Supervisor and will carry out regular reviews to ensure that you are complying with the terms of the IVA.
Following each anniversary of the acceptance of the IVA the supervisor will issue a report on the progress of the IVA to you and to all of your creditors.
What will the IVA Cost?
All costs of the IVA will be deducted from the money that you pay into the IVA and will include a set-up fee, known as the Nominee’s fee, and then fees for supervising the IVA after it has been accepted, which are usually based on a percentage of the money you pay into the IVA, plus expenses incurred.
What will Happen to My Home?
There will be a clause in the IVA, which states that you will value your property 6 months before the end of the IVA and confirm the amount(s) owed for any mortgage or secured loan in order to establish the amount of the equity.
Then you should try to obtain a re-mortgage to release a percentage, not all, of this equity (or your share only if the property is jointly owned) in order to make a payment into the IVA.
When it is not possible to raise the amount required by a re-mortgage, a friend or family member will sometimes pay an amount into the IVA in order to compensate creditors for the loss of any equity.
If there is no person available to make this payment into the IVA, then the IVA is usually extended for a further 12 months and you continue to make your monthly payments for this period, and this will be accepted instead of the equity release.
What if I Fall Into Arrears?
The IVA proposal and the accompanying standard terms and conditions anticipate that there may be times when the full monthly amount cannot be paid into the IVA due to temporary reductions in your income due to illness or other reasons or unexpected expenses for repairs.
Any arrears will need to be cleared at the end of the IVA before it can be successfully concluded.