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An Individual Voluntary Arrangement is a way of clearing you debts without having to go bankrupt. It is a formal agreement between you and your unsecured creditors. You pay an agreed monthly sum, usually for 5 years. This is divided up between your creditors according to the amount of debt you have with each, who accept the sum in settlement of the amount you owe them. Any debts remaining at the end of the term are written off – usually between 20-60% of the debt.
No they don't because they get to vote whether to accept or reject it. But as long as creditors who collectively own 75% of your debt accept the proposal then the IVA becomes legally binding on all of your creditors. Even those who voted against it or who didn’t vote at all will be bound by it.
The reason you are entering an IVA is because you cannot meet the contractual payments on your debts, and are unlikely to ever be able to fully repay them. Creditors will be aware of this, so even if it means they'll write off some of your debt, an IVA will also mean they can count on receiving the remainder – which should be more than they would receive if they pursued an alternative such as bankruptcy.
Creditors will rely on the Insolvency Practitioner, who will examine your finances closely and ensure that the IVA is fair to them as well as to you.
You don't have to attend the meeting, which is normally held by proxy (that is, your creditors will post or fax their vote in). However you will be told exactly what date and time your meeting is, and you should ensure that you can be contacted in case there are requested changes you need to consider.
The monthly payment depends on your income and expenditure, and is agreed so that it will be affordable to you and leaves you with enough to also pay any priority debts (such as mortgage or rent, utility bills and Council Tax). You will be required to make regular monthly payments, which are usually arranged by Standing Order directly from your bank.
The IVA provider, such as Bridgewood, will charge fees and expenses for administering your IVA during its term (normally 5 years). These costs will be deducted from the payments you make, rather than be charged to you directly.
The fees and expenses are detailed in your IVA proposal so that both you and your creditors will have an opportunity to review them.
The benefit of an IVA over bankruptcy is that you are not required to sell your house. However you may be required to release some of any available equity in your home, to increase the amount you can pay your creditors. This normally happens during the latter stages of your IVA.
An IVA will only deal with your unsecured debts and doesn’t affect your secured debts at all. When your IVA payments are calculated we make sure that you have enough left each month to pay your mortgage, as well as any other priority debts (such as Council Tax and utility bills).
Yes you can. Both you and your partner will have an IVA, but they will be “linked” to taken into account any joint debts and shared household income & expenditure.
If you are no longer able to meet your payments (for example if you lose your job) then this can threaten the success of your IVA. There are provisions within the terms of an IVA to allow some time to overcome these problems and, if you are finding it hard to make your payments, we will try to renegotiate lower payments with your creditors, although they are not obliged to accept this. If the problems cannot be resolved then your IVA is likely to be terminated, which may lead to you being made bankrupt.
If you reach the end of your IVA term (normally 5 years) and have made all the payments it was agreed that you would, then whatever payments you have made will be considered in full and final settlement of your debts.
This means that your unsecured debts will be cleared, with any remaining balances written off and the creditors involved will have no further claim against you.
An IVA is a form of insolvency and is covered by Government legislation. It therefore requires a trained and licensed practitioner, called an Insolvency Practitioner (IP) to ensure that it is administered correctly. An IP is highly qualified (similar to an accountant or solicitor) and has the experience to act in formal insolvency cases.
The IP is responsible for presenting your IVA to your creditors and ensuring that it takes into account their interests as well as yours.