IVA information - Questions and answers

Below we have compiled a list of the most frequently asked questions together with the answers.

How much is X amount?

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. See our free budget form as we help you work this out. 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 re mortgage, in full and final settlement.

How do my creditors say yes or no to my proposal?

A creditors' meeting is held at which you may be asked to attend and your 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. Creditors do not usually attend the meeting.

Where does the creditors’ meeting take place?

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. In the majority of cases you do NOT have to attend as creditors usually vote by post and facsimile.

Can creditors change their mind at a later date and demand more?

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.

Am I bankrupt if I enter into an IVA?

No. The stigma of Bankruptcy is avoided by entering into a Voluntary Arrangement.

Can an IVA reverse a Bankruptcy?

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.

Is there any publicity?

There is no press advertisement; however the Department of Trade & Industry does keep a register of everyone who has entered into a Voluntary Arrangement.

Who is going to do the proposal for me?

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.

Have I legally discharged all my unsecured debts?

Yes, provided they are included in the proposal and the arrangement is completed satisfactorily.

How does my employer view an IVA?

In a much better light than Bankruptcy, by entering into a Voluntary Arrangement you are legally discharging your debts. If not sure then contact your union, or personal officer to see where you stand. You should be able to do this without initially revealing your name. For police officers or support staff we recommend you contact either Federation, Welfare and or Professional Standards.

What is my position regarding further credit after completion of the IVA?

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. The IVA should be recorded on your credit file for 6 years from the date of commencement

What happens if I die during the term of the IVA?

Some proposals incorporate a clause that Life Assurance is obtained to cover the event of death, with premiums being paid from contributions received.

Do creditors still charge interest on my liabilities?

No, interest is usually frozen from the date the IVA is approved by creditors.

What happens to my house?

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.

Can I end my IVA early; does it have to be for 5 years?

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.

When would legal advice be required?

Mainly to ascertain whether assets have been correctly divided following a divorce or separation, to establish the legality of any transfer of assets which may prejudice creditors or establishing the beneficial interest the debtor/borrower has in his or her property for bankruptcy comparison figures.

Debts not covered by an IVA

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. The IVA can include a mortgage shortfall debt; this is the debt the mortgage lender is claiming after a house has been repossessed.

Do I qualify for an IVA?

Creditors usually look for a higher level of unsecured borrowing typically £15,000 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;

• 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.

When not to propose an IVA

• 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.
• 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.
• When you are NOT insolvent.

Don't rush into an IVA; explore all your options, take professional advice from more than one specialist.

Can debtwizard help decide if an IVA is right for me?

If you would like to discuss your personal circumstances, in total confidence, and to find out if you qualify for an Individual Voluntary Arrangement (IVA) then telephone 0800 197 8433 8am - 9pm or complete the rapid response form and we will call you.

If we can help you propose an IVA then you will not have to pay up front Nominee fees, instead the fees are taken with the creditors consent from contributions that you pay into the IVA. More on fees and how debtwizard.com is funded - here

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