Pros and Cons of going for an IVA

xnetco

Hello All,

A friend of mine is considering an IVA. Can you tell me the pros and cons? It seems to me that anyone can work up a serious amout of debt and then pay off a smaller amount over a 5 year period with the rest being wiped off.

Please tell me there are more downsides to it?

T

rog2

Hi xnetco,

It really is NOT that simple. IVAs are, indeed, one solution to debt problems, but by no means the only one and an IVA may not even be applicable to your friend. In order to give the best advice, we would need to know the extent of your friend's problem. Could he/she post a SOA Statement of Affairs and then, perhaps, we can answer your question.

moozie_2

Hello there and well done on lookng out for your friend.

I am sure someone else will be here to advise soon but in the mean time, a search of the forum should bring up a lot of post that you may find useful.

gettingitsorted

xnetco wrote:

Hello All,

A friend of mine is considering an IVA. Can you tell me the pros and cons? It seems to me that anyone can work up a serious amout of debt and then pay off a smaller amount over a 5 year period with the rest being wiped off.

Please tell me there are more downsides to it?

T

An Individual Voluntary Arrangement - IVA is a formal agreement between you and your creditors where you will come to an arrangement with people you owe money to, to make reduced payments towards the total amount of your debt in order to pay off a percentage of what you owe then generally after 5 years your debt is classed as settled.

Due to its formal nature, an Individual Voluntary Arrangement - IVA has to be set up by a licensed professional

Unlike private sector firms our teams do not charge any upfront fees for putting together a client's proposals for an Individual Voluntary Arrangement - IVA.

How does it work?
Once a decision has been made that an Individual Voluntary Arrangement - IVA is right for you, you will be asked questions regarding your current financial situation. Based on the information you have given, a repayment amount will be agreed with you. Once proposals have been drawn up you will need to check and sign these and return them to your IP.

An application may then be made to the court for an Interim Order. Once this is in place, no creditors will be able to take legal action against you. A creditor meeting will be arranged to which you should attend.

For an Individual Voluntary Arrangement - IVA to be approved, creditors will be called upon to vote either for or against the arrangement. If only one creditor votes "for" the Individual Voluntary Arrangement - IVA, the Individual Voluntary Arrangement - IVA will be approved. However, if only one creditor votes against the Individual Voluntary Arrangement - IVA and they represent less than 25% of your total debt, the meeting will be suspended for a later date and other creditors who did not vote will be called upon for their vote.

If the creditor who voted against the Individual Voluntary Arrangement - IVA represents more than 25% of the total debt you owe the Individual Voluntary Arrangement - IVA will fail. This is because an Individual Voluntary Arrangement - IVA will only ever be approved if 75% in monetary value is voted for. If any of the creditors don't vote, it is assumed that they will vote FOR the Individual Voluntary Arrangement - IVA.

The Individual Voluntary Arrangement - IVA will be legally binding. As long as you keep up the repayments, when the term of your agreement is finished, you will be free from these debts regardless of how much has been paid off.

During the period of your arrangement your financial situation will be reviewed regularly to see if there has been any change in your circumstances.

It is very important that consumers do not confuse an Individual Voluntary Arrangement - IVA with a Debt Management Plan, which are not legally binding.

The Individual Voluntary Arrangement - IVA team at The UK Insolvency Helpline are often surprised to see that few people actually know that the option of an Individual Voluntary Arrangement - IVA even exists.

Most Individual Voluntary Arrangement - IVA cases are based around one, affordable, monthly, payment, over a period of 60 months.

An Individual Voluntary Arrangement - IVA proposal has to be prepared by a licensed Insolvency Practitioner (IP) who then presents it to creditors at a creditors meeting.

In the case of a consumer Individual Voluntary Arrangement - IVA it is unusual for any creditors or their representatives to attend the creditors meeting as most prefer to vote by fax or by post.

The rules of an Individual Voluntary Arrangement - IVA state that providing 75% (in value terms) of those that have voted, vote to accept the proposals (with or without modifications) then the Individual Voluntary Arrangement - IVA is agreed and becomes legally binding on all other parties whether they voted or not.

When an Individual Voluntary Arrangement - IVA is accepted the IP's role becomes that of supervisor, monitoring the Individual Voluntary Arrangement - IVA's progress and ensuring that the terms and conditions that were agreed to at the creditors meeting are properly adhered to.

It is the debtor's responsibility to pay the agreed payments to the IP who will then ensure that these payments are distributed to all creditors on a pro-rata basis in accordance with terms and until the successful completion of the Individual Voluntary Arrangement - IVA. It is in the debtors own interest to maintain their payments as failure to pay will almost certainly result in the failure of the Individual Voluntary Arrangement - IVA.

Upon the successful completion of the Individual Voluntary Arrangement - 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 (known as a composition of debts) and the debtor is then free to make a fresh financial start.

It is worth noting that if you do enter into an Individual Voluntary Arrangement - IVA with your creditors and you have an endowment policy linked to your mortgage then you may be expected to cash it in and pay the proceeds into the arrangement. Likewise, if your property has a reasonable amount of equity then it is likely that a some of it will have to be released at sometime during the arrangement (usually the end), so it can be paid to creditors. Drastic as this may sound it can be a deciding factor in whether an Individual Voluntary Arrangement - IVA is approved by creditors and a realistic way in which a debtor can retain their property. `

xnetco

Thanks guys.

I've told him to put an SOA on here but he's not interested which is a shame as I'm sure you could all help him.

What happens to his credit rating during the IVA?

sandralovescats

The credit rating goes to 0

The restrictions are the same as for bankruptcy - no cheque book
no credit allowed
no cards

The IVA is listed with the bankruptcies on the official insolvency site.

rog2

xnetco wrote:

Thanks guys.

I've told him to put an SOA on here but he's not interested which is a shame as I'm sure you could all help him.

What happens to his credit rating during the IVA?

We would love to help him, but the advice you have been given is good and should help him make a decision.

One small word of caution though. An IVA is administered by an Insolvency Practitioner, who is generally a private licensed practitioner, who earns his money by charging fees that come out of whatever your friend would be paying. By their very nature, this will attract a lot of people who are more interested in what they can charge, rather than in how they can best help you. Just advise your friend to be a bit wary as, once you have agreed an IVA, you are in a legally binding contract so you need the best advice.
Before making his final decision, suggest that he talks to PAYPLAN, or CCCS - they are charities, their advice is free and impartial and they can point your friend to reccomended Insolvency Practitioners.

xnetco

Thanks, how long does that last for?

xnetco

rog2 wrote:

We would love to help him, but the advice you have been given is good and should help him make a decision.

One small word of caution though. An IVA is administered by an Insolvency Practitioner, who is generally a private licensed practitioner, who earns his money by charging fees that come out of whatever your friend would be paying. By their very nature, this will attract a lot of people who are more interested in what they can charge, rather than in how they can best help you. Just advise your friend to be a bit wary as, once you have agreed an IVA, you are in a legally binding contract so you need the best advice.
Before making his final decision, suggest that he talks to PAYPLAN, or CCCS - they are charities, their advice is free and impartial and they can point your friend to reccomended Insolvency Practitioners.

I agree, I've told him this already but he's not interested. I guess it comes to that point when your in so much debt what's the point in worrying about it any more.

rog2

xnetco wrote:

I agree, I've told him this already but he's not interested. I guess it comes to that point when your in so much debt what's the point in worrying about it any more.

If your friend is 'that much in debt' then perhaps an IVA is NOT the best answer. He will need a minimum disposable income to enter into an IVA.

sandralovescats

xnetco wrote:

Thanks, how long does that last for?

Five years