Advantages
- No publicity (no public notices or advertisements).
- Avoids the stigma of bankruptcy.
- Creditors usually receive a greater dividend than what they would expect in a bankruptcy.
- More flexible than a bankruptcy in that you have more control over your assets and payments to creditors. The length of term of the arrangement can also be varied.
- Permits an individual to hold certain offices such as director of a limited company.
Disadvantages
- Failure to comply with the terms of the IVA may result in eventual bankruptcy
- There is no guarantee as to how the creditors’ will vote
- Creditors may wish to vary or modify the proposal
- In very few instances the initial costs for the Nominee’s fees need to be paid in advance
- Further credit is usually prohibited within the term the arrangement
Below we have compiled a list of the most frequently asked questions together with the answers.
What is an Individual Voluntary Arrangement, IVA?
How much is X amount?
How do my creditors say yes or no to my proposal?
Where does the creditors’ meeting take place?
Can creditors change their mind at a later date and demand more?
Am I bankrupt if I enter into an IVA?
Can an IVA reverse a Bankruptcy?
Is there any publicity?
Who is going to do the proposal for me?
Have I legally discharged all my unsecured debts?
How does my employer view an IVA?
What is my position regarding further credit after completion of the IVA?
Do creditors still charge interest on my liabilities?
What happens to my house?
Can I end my IVA early; does it have to be for 5 years?
Fees
Debts not covered by an IVA
Basic procedure
Do I qualify for an IVA?
When not to propose an IVA
Can Only help decide if an IVA is right for me?
In the simplest terms it is a contract between the debtor and their creditors. The debtor puts forward a proposal to his / her creditors, which outlines their current financial position and some of the history behind it. They make the creditors the best offer they can afford, either from current income or from a third party contribution in settlement of all their unsecured liabilities. Contributions are normally paid monthly and typically last for between 3 to 5 years, however a one off lump sum payment can also be made sometimes without the need to make the monthly payments.
In the event that the debtor is unable to offer his / her creditors repayment in full then creditors may well accept a lower amount on the basis that this is more than they are likely to receive in his / her bankruptcy which is why the IVA is seen as more attractive. If the requisite majority to approve the debtor’s proposal is achieved, (75% in value of creditors who participate in the voting), then the arrangement is legally binding on both the debtor and the creditors. Once the debtor has completed his / her part of the contract and providing the terms of the IVA are compiled with then the creditors have no recourse over that debt and the debt is deemed to have been legally discharged. Top
In order to determine how much you can afford to pay per month you will need to calculate how much you currently spend on day-to-day living expenses. Then, you deduct this amount from your net income per month and you have the figure you could afford to pay per month into the Voluntary Arrangement. Alternatively creditors may well accept a one off lump sum payment, such as a remortgage, in full and final settlement. Top
A creditors meeting is held at which creditors will have been sent forms for voting on whether to accept or reject the proposals put forward. Your creditors may submit their votes by post or in person on the day of the meeting. Top
It is normally held at the office of the appointed firm that prepared the proposal for you. In some instances the meeting may well be held at a place convenient to the majority of your creditors. Top
Section 262 of the Insolvency Act 1986 allows creditors 28 days from the date that the Chairman’s report is filed in Court to appeal against the decision to approve the debtor’s proposal. For their appeal to be successful, the creditor will need to satisfy the Court that there has been a material irregularity or that they have been unfairly prejudiced. They cannot simply appeal because they are unhappy with the outcome. Providing no such appeal is lodged, once the proposal achieves a 75% majority (in value) in favour, by those creditors participating in the voting, either in person or by proxy, it is approved. The proposal is binding on all creditors who were notified and entitled to vote. Top
No. The stigma of Bankruptcy is avoided by entering into a Voluntary Arrangement. Top
If the creditors agree to your proposal and you have the 75% majority, then the Bankruptcy can be annulled. There would be solicitor’s costs in addition to the arrangement fees. Top
There is no press advertisement; however the Department of Trade & Industry does keep a register of everyone who has entered into a Voluntary Arrangement. Top
It is highly unlikely that the debtor will be able to prepare a proposal to the standard expected by the court therefore you will need to contact an Insolvency Practitioner. If he/she decides that there is some merit in you proposing an IVA then he/she will become the nominee. The firm should then correspond with your creditors immediately and let them know you are intending to enter into a Voluntary Arrangement. Preparation will then begin for all the necessary documents and will summon a meeting of your creditors. We must emphasise that although the nominee will be assisting you with the preparation of your proposal you will be responsible as to the accuracy of the contents therein, therefore you are to ensure that the contents of the proposal are correct. Top
Yes, provided they are included in the proposal and the arrangement is completed satisfactorily. Top
In a much better light than Bankruptcy, by entering into a Voluntary Arrangement you are legally discharging your debts. Top
This is a very open ended question, and is entirely up to the lender. On completion of the arrangement your debts are deemed to have been paid in full therefore you should not have a problem getting credit. But having said that if a major credit card were one of the creditors in your Voluntary Arrangement it is most likely they would not extend you credit again. Top
No, interest is usually frozen from the date the IVA is approved by creditors. Top
This depends on whether the ownership is joint or sole and if there is any equity in the property. If the equity were substantial then a possible option would be to re mortgage now and pay your creditors, thus avoiding an IVA. However, if payment in full is not possible then an amount could be pledged from the re-mortgage in full and final or together with additional monthly contributions for a period of time, previously agreed with your creditors. Another option that creditors may consider is that the debtor pledges his/her share of any equity by re-mortgaging towards the end of the IVA. You can request that any such equity be excluded from the arrangement, however, creditors may well ask for this to be included as part of their acceptance to your proposal by way of a modification at the creditors meeting. Top
Most insolvency firms in the UK use the standard terms and conditions therefore one would expect there to be provision for you to request another creditors meeting at any time during your IVA so as to enable you to put forward an offer to your creditors to end the arrangement early.
For example; say you pay £300 per month for a period of 5 years into the IVA and have been doing so for 2 years. A family member, friend or third party has offered to lend you a lump sum to end the IVA. You have 36 months at £300 per month remaining to pay into the IVA, this equates to £10,800.
There is no golden rule to adhere to here as to how much to offer and after what period of time since the IVA was approved, you can offer what you like and when you like, as a guide we suggest half to two thirds of the remaining sum to be paid into the IVA. In the example above you may wish to consider £5,400 to £7,000. You will need to have a reason why you wish to end the IVA together with confirmation that you can raise this sum. You do not ballot the creditors yourself, this will be done by the firm supervising your IVA and the same voting procedure applies as what was required at your initial creditors meeting, i.e. you need to have 75% in value of those voting to accept your offer. Your appointed Supervisor will be able to explain this in more detail. Top
You will need to agree the fee with the Nominee as this is usually payable in advance before any work is undertaken. If there is a shortfall on this fee then it can, with the Nominee’s and creditors consent, be drawn from contributions paid into the arrangement. Nominee’s fees include the preparation of the proposal, the calling and holding of the creditors meeting. Through debtwizard.com we are able to offer you the service of no fees up front, instead they will be drawn from the contributions you make into the IVA.
As a guide Nominee’s fee will range between £1,250 - £4,000 plus vat and will be based upon the number of creditors, agents representing creditors and the complexity of the case.
Supervisor’s fees are usually based on work undertaken; time spent and includes the supervision of the arrangement over the period together with the production and circulation of annual reports to all creditors on the efficacy of the arrangement. They also cover for correspondence and telephone calls with the debtor and creditors on related queries. Supervisor’s fees are usually drawn from the contributions and are not payable separately by the debtor. Through debtwizard.com we are able to offer you the service whereby the Supervisor's fees will be drawn from the contributions you make into the IVA. Top
An IVA cannot affect the rights of secured creditors i.e. mortgages or preferential creditors such as the Inland Revenue except with their agreement. They can however be classed as a contingent creditor. Top
- You will need to approach at least two or three firms that specialize in personal insolvency; this will be Insolvency Practitioners / Charted Accountants. Have a list of your creditors and the amount outstanding available.
- If a decision is made to propose an IVA then the firm instructed should write to all your creditors explaining your intentions and also to ballot the principal/largest creditors.
- You will receive a draft proposal which gives you the opportunity to verify that the details therein are correct.
- A meeting of creditors will be called for your proposal to be considered.
- Once approved you and your creditors are in a legally binding agreement.
- Provided you have completed your part of the arrangement then you will receive a “Certificate of Satisfaction” detailing as such from the Supervisor.
If you enter into an IVA and fail to give details of your assets and liabilities or fail to do what has been agreed under the arrangement then you may face a bankruptcy petition by either the Insolvency Practitioner or any creditor bound by the IVA. Top
Creditors usually look for a higher level of unsecured borrowing typically £20,000 and upwards and with multiple creditors as below that figure there may well be other more suitable options for both the debtor/borrower and lender. In some circumstances, such as a bankruptcy petition against the debtor, the debtor may wish to deal with the petition or overturn a bankruptcy by proposing an IVA. In this instance there is really no level of debt to bar the IVA. You will need to be able to fund the IVA either by way of monthly contributions, monthly contributions and a lump sum or a lump sum only. In any event the IVA will need to offer more to creditors than what they would expect to receive in a bankruptcy scenario. Top
If you have reasonable equity in your home then creditors may well look for your share as well as any endowment policies and savings plans, this may cover the debt in full and therefore there will be no need to propose an IVA.
If your creditors require you to pay 100 pence in the pound then this is payment in full, you then stand the risk of paying interest on your liabilities. More importantly the firm handling the IVA will still need to be paid their fees as well, commonly known as Nominee and Supervisor’s fees. This could well mean that you will pay an additional £5,000 to £12,000 on top of your debts according to the fee structure of your appointed firm.
Don't rush into an IVA; explore all your options, take professional advice from more than one specialist. Top
Yes we can. Complete the form that appears on every page. If we can help you propose an IVA then you will not have to pay up front Nominee fees as described above, instead the fees are taken with the creditors consent from contributions that you pay into the IVA. Top
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