IVA FAQ

How can I afford my monthly payments?

In an IVA, monthly payments are a matter of individual financial circumstances of the debt holder. During an IVA, regular reviews of the financial conditions and ability will be undertaken to maintain debtor’s monthly payments. If during these reviews, it is agreed that your situation has not changed, then you will continue to make your monthly IVA payment as normal.

If however, your financial standard has changed for the better, you may be asked to increase your monthly payments accordingly.

Here is the process of IVA through which you can easily afford your monthly payments:

1. All bank descriptions with account numbers and total amount for the debt need to be brought together.
2. A detailed background of the client and his debt records will be provided to the creditors.
3. All salary slips and identity cards are collected.
4. The IVA document will be posted out to all creditors with the new proposed payment plan designed under IVA.
5. 2-3 weeks later, an IVA creditors’ meeting will be set up where the creditors’ decisions are made clear.
6. The process ends with final decisions of the creditors.
7. Now, you have to pay a monthly instalment. This repayment will be affordable and according to your repayment ability.

Will I have to still repay all my debt?

A salient feature of Individual Voluntary Arrangements is that there is no interest on the debts and the debtor has to pay off at least 75% of debt. In this method, debtor has to pay a monthly installment which is prepared after calculating your incurred debt amount, salary and expenditure.

One benefit of the fact that IVA’s are official and legally binding agreements is that if you can get 75% of your creditors to concur to an IVA, the rest are bound by it even if they do not want to be. The 75% is a percentage of the value of the debt, not the number of creditors, so if 75% or more of your balance was owed to one creditor, you would only need the agreement of that one person to set up an IVA for all your debts.

When you enter to an IVA the amount of interest you owe is usually frozen from the start date, so your debt does not grow any more. Compared to bankruptcy, you have far more control over what happens, and are far less likely to lose your assets. You can also continue your business and are still allowed to have a bank account. Setting for an IVA does cost much, but it costs less than filing for bankruptcy. The IVA suppliers take their share from the monthly payments you make, which generally are more than made up for by the amount of debt that gets on paper under the scheme.

Do I have to attend the creditors' meeting?

The process of an IVA begins with the meeting of the IVA team and the debtor’s creditors. In this meeting, the team goes through the budget sheet of the debtor to infer whether he has any extra money left over after all his reasonable living expenses have been paid.

You do not have to personally attend the creditors’ meeting. In fact, you can contact them through phone or mail on the very day of the meeting, in case the Insolvency Practitioner needs to contact you to request any instant changes to be made in the proposal. So in any emergency, you can carry on with your meeting over the phone. However, your presence can be more affective than absence as you can convince your creditor accordingly.

Do all my creditors have to agree to an IVA?

In an IVA, if you can get 75% of your creditors to concur to an IVA, the rest are bound by it even if they do not want to be. The 75% is a percentage of the value of the debt, not the number of creditors, so if 75% or more of your balance was owed to one creditor, you would only need the agreement of that one person to set up an IVA for all your debts.

After completion of the time period of the IVA, the debtor will be considered debt free even though they may not have actually paid off all of their debts in full. Any outstanding balances are written off and debtor could be look forward to a fresh financial start.

How much will it cost me?

The main reason behind the popularity of the IVA with both creditors and debtors is the fee structure. The fee in case of an IVA is likely to be less than the court costs and Official Receiver fees involved in a bankruptcy.

An IVA includes two types of fees:

1. Nominees’ fee
2. Supervisors’ fees

The average cost of an IVA fee is around £1,500 in addition to VAT. The concerned person handling the IVA will not be personally invoiced for this. Other than this, there will be annual fees which is also known as a supervisors cost. It costs around £50 per month on average.

The cost of an IVA will be included into the IVA monthly payments made. The monthly amount paid into the same will cover the payments to your creditors as well as the cost and fees for carrying out the IVA. It is important to consider that if the IVA fails at creditors meeting or you have a change of mind, you will not have to pay any cost or fees, whatsoever, for this service.

What if I can’t make my payments?

This situation of non payment is can be due to loss of job and the event of obtaining another job, albeit, at a lower salary. In such a case, it may be possible to convene a meeting of creditors to accept a lower level of monthly payments, but the outcome of this eventuality cannot be guaranteed. Creditors sometimes will not be able to provide you relief in that scenario. Again, 75% by majority would have to vote in favor of any change in the terms of the IVA. If the creditors agree, then it’s OK. 

But if the creditors reject this, or you are simply unable to make your payments at all, then the arrangement will be terminated. Depending on the terms of the offer, either the Supervisor will have to be formally requested to declare you as bankrupt, or the IVA will simply fail and you will be back to square one again.
If the arrangement fails, for whatever cause, you will lose the benefit of the agreed debt write-off which would otherwise have cropped up on a successful conclusion. You will again become responsible for the whole leftovers of the unpaid debts. If this happens well into the term of the deal, then it might so happen that all the payments made till date have been nullified.

What if my creditors try to make me bankrupt?

IVA can be really helpful for the debtors who are in misery due to phone calls and notices of the creditors. Through this option one can easily pay off their debts and avoid bankruptcy. It is a legal and government approved method of resolving arrears that turn away from the consequences of bankruptcy.

In this method, debtor has to pay a monthly installment. This monthly installment is prepared after calculating your debts incurred, monthly salary and expenditure. The repayment period is normally for a time period of five years. After this period, debtor is declared debt free even if he has not repaid the whole debt amount. In case you are regular with your predefined payments, there’s nothing much a creditor can do once he has agreed to an IVA programme.

In an IVA, monthly payments are a matter of personal financial condition of the debtor. During an IVA regular reviews of the financial conditions and ability will be undertaken to maintain debtor’s monthly payments. These reviews are normally conducted once in an year. If during these reviews, it is agreed that your situation has not changed, then you will continue to make your monthly IVA payment as normal. By paying monthly payment on time, you can pay off your debts without further hassles and keep your creditors away.

Will I lose my house? (IVA)

It is important to understand all the terms and conditions related to IVA according to which, if you are living in a rented accommodation, there is no risk to your home under an IVA.  In such a condition, it is important to notice the tenancy agreement, whether your landlord doesn’t mention any clause about tenants entering into an IVA.

If you have unsecured property then, your creditors will want details of any equity that you have in the house. Equality is basically a difference between the value of your house and the amount of the loans secured against it.
In the IVA process, the Insolvency Practitioner will ask you to have your house valued. Your creditor is free to get up to 75% of your share of the equity. You may be asked to discharge these funds for the creditors benefit within the 5 years. It is also known as re-mortgage.

If you don’t have equality in the house to start IVA, then also your creditor will ask you to have the house valued in the 4th year of the arrangement. If there is equity in your house then the terms of the IVA will show it.

Will I ever be debt-free?

Choosing the ideal alternative can be sometimes tricky; Chance for Loans can help you in choosing ideal option according to your situation. Debt Management Plan is the first option. Under this plan, debtor has to connect a management company. By paying a minimal additional amount, we enable debt repayment at less interest rates and longer duration for you.

Debt consolidation is another option to manage your debts which entails taking out one loan to pay off all others. It is a strategy sometimes used by consumers to better manage their debt crisis. It allows you to reorganize your credit and save funds.

If you want legal support then IVA can be better option. The term ‘IVA’ is referred to Individual Voluntary Arrangements which is a formal arrangement through the court, set up by a Licensed Insolvency Practitioner and is intended to be an alternative to bankruptcy. Through this process, you can be debt free within 5 years.