How does an IVA work?
An Individual Voluntary Arrangement (IVA) is a legally-binding agreement drawn up by an insolvency practitioner (IP). It’s between you and your creditors, as long as you stick to your monthly repayments over the set period of time. Your IP will explain to you that an IVA is a formal application and should be taken seriously by both yourself and your creditors. It’s a good idea to get advice from someone impartial – this could be a financial adviser or a solicitor. They can determine, based on your income and essential expenditure, the likelihood of creditors approving an IVA.
Before you start
Before you apply for an IVA it’s worth noting that there are a couple of fees. This includes:
- The set up fee
- The handling fee for every repayment you make
It’s also a good idea to have your financial details to hand such as your income, assets, liabilities and essential expenditure.
Step 1: Statement of Affairs
The Statement of Affairs contains information you provide to your IP. It includes details on your current financial situation such as your income, assets, liabilities and essential expenditure, as well creditor details.
Step 2: Interim Order
If your creditors are taking legal action on you, or if you think they’re planning to, then your Insolvency Practitioner may apply for an Interim Order. This suspends all legal action against you while your IVA application is created.
Step 3: Proposal sent to creditors
Once you’re satisfied with the proposal drawn up by the IP, it is sent to your creditors, the Insolvency Service and your local county court. The proposals includes the date for the Meeting of Creditors. This is usually sent out no earlier than 14 days of the meeting date so your creditors can consider any amendments and modifications they may want to suggest at the meeting. Creditors can request more time to read through your proposal or more information on your case.
Step 4: Meeting of Creditors
Creditors attend the meeting to vote on accepting or rejecting the proposal. A majority of 75% of creditors must vote in favour of your proposal for it to be approved. If your case is approved, even the creditors that didn’t vote or voted against you are legally bound to the terms of your IVA.
Step 5: Supervisor appointed
If your IVA is approved then a supervisor, usually the IP, will monitor your monthly repayments and ensure everyone, including creditors, are sticking to the IVA terms. Once you make the final repayment you are free from all legal liabilities.