What is an IVA?
An IVA is a formal agreement set up by a licensed insolvency practitioner between you and your unsecured creditors to repay your debts over a period of time. This allows all or a percentage of your debts to be repaid over this time period. Any debts still remaining after the period would be written off.
In the majority of IVA’s, you would make an affordable monthly payment into an IVA fund which would then be divided between your creditors on a periodic basis over the term of your IVA.
The agreement usually lasts between two and five years but does vary depending upon personal circumstances.
An IVA is legally binding. It was introduced by the Government as part of the Insolvency Act 1986 as an alternative to bankruptcy.
Who can enter into an IVA?
Any adult in England and Wales who is insolvent may propose an IVA to their creditors for approval.
How much does an IVA cost?
Entering into an IVA means you are agreeing to repay an affordable amount into an IVA fund held by the supervisor of the arrangement. The level of the repayment is usually set by examining your income and expenditure to calculate your affordability and agreeing this with your creditors.
You must remember that with an IVA in place you would only have to pay your agreed contribution. There would be no additional payments to your existing unsecured creditors as they would be included in the arrangement.
The total sum paid to your existing unsecured creditors would be paid from the arrangement fund. Once the final payment has been made you receive a certificate stating that you have been discharged from the IVA scheme.
HBG’s fees would be paid from the agreed contributions. The unsecured creditors have to approve these fees prior to them being drawn. No fees would be directly payable to us by you.
How long does an IVA last?
An IVA can last for any time period that is agreed with your creditors. However, this is usually six months to five years depending upon personal circumstances.
How do I set up an IVA ?
We have a standard questionnaire which one of our trained insolvency advisors can help you to complete. We also prepare a number of authorisation letters for you to sign. On their completion, the proposal setting out your intentions would be prepared. Once you have agreed to its content we would send it to your unsecured creditors for their consideration. They would then vote on this.
If your creditors agree, one of our licensed insolvency practitioners would be appointed supervisor of the IVA. This is to ensure that the IVA is administered appropriately. Once accepted the IVA becomes a legally binding agreement between you and your creditors.
What are the advantages of an IVA over bankruptcy?
IVA’s do not have the same negative stigma that is attached to bankruptcy so there is likely to be less impact on your reputation. A bankruptcy is advertised but an IVA is not. An IVA is a private agreement between you and your creditors. You are more likely to lose your assets in bankruptcy than you are in an IVA. Some employment contracts that do not allow an individual to become bankrupt may deem an IVA to be acceptable.
Bankruptcy procedures tend to incur greater costs than those involved in an IVA.
Can I propose an IVA if a bankruptcy petition has been made against me?
You would be able to apply for an interim order which, if granted, would prevent any court proceedings being continued against you while the interim order was in force.
This would then enable the proposal of the IVA which, if accepted by creditors, would prevent any court action already commenced against you from proceeding. If a bankruptcy order has already been made, an IVA may still be proposed to your unsecured creditors in conjunction with the trustee in bankruptcy.
Will I have to sell my house if I set up an IVA?
You may be asked to sell your property. However, you could also be asked to release some of the equity in it. This would be agreed with creditors prior to the proposal being approved.
Will I be able to continue to run my business if I enter into an IVA?
You would remain in control of your business providing you adhere to the terms of the IVA agreement.
Does an IVA negatively impact my credit rating?
There would be a note on your credit file alerting companies to your IVA agreement.
What happens if I miss any payments into the IVA?
If you miss your agreed payment into the IVA, your IVA supervisor would contact you to discuss the position. Your IVA proposal would usually state that if two or more payments are missed, then the supervisor would be required to petition for your bankruptcy.
However, the situation would be discussed with you prior to any action being taken. This is to determine whether there would be an alternative solution such as a revised payment plan. Any alterations must be agreed by your creditors.
Will my creditors agree to an IVA?
To enable an IVA to be approved, a minimum of 75% of your creditors in value who vote will need to accept the IVA. HBG will work with you to ensure that any IVA arrangement that you propose is a proposal that we believe will be acceptable to your creditors.
When an IVA is completed what happens?
The supervisor of your IVA would issue you with a ‘Certificate of Completion’; this is normally issued within one month of the final payment being received.