 |
An IVA is a legally binding arrangement with your creditors which allows you
to repay your debts in affordable monthly payments over a fixed period of time,
usually five years.
They were introduced in 1986 as an alternative to bankruptcy to give clients
who had assets to protect a way to pay off as much of their debt as they
can realistically afford within a finite period of time.
An IVA once approved has the effect of freezing interest and charges and
legally protects you from further creditor action from the date of agreement.
Once approved
creditors cannot take action against such as judgments and charging orders.
However, an IVA will not prevent action by secured creditors for example
from action by
your mortgage company to repossess your house for mortgage arrears.
It is a formal arrangement between a client with solvency problems and their
creditors. The terms of the arrangement will depend of what both parties
are prepared to agree and will often allow for a certain amount of debt forgiveness.
All unsecured creditors will be bound into the arrangement, including student
loans, council tax and utilities arrears.
A licensed insolvency practitioner has to propose the arrangement. It is
their job to remain objective and ensure that the arrangement is fair for
both you
and your creditors. This is because it requires you to introduce the maximum
you can afford, yet also allow you enough money to maintain a reasonable
standard of living.
During your initial consultation your advisor will agree a contribution with
you that is is calculated with you and takes into account your household
income and expenditure. It is important that you can explain any obviously
high items
of expenditure and that you feel comfortable with the agreed sum. Should
you consider the amount unrealistic please talk to your advisor.
An IVA has to provide for a better outcome than bankruptcy and also give
a return to creditors of at least 25p in the £. This will be calculated
by comparing the outcome of both scenarios and your advisor will explain
this to you.
Homeowners will have to introduce a sum of money from their property in order
to draw the arrangement to a conclusion. This is because an IVA has to provide
for a better return to creditors than bankruptcy and if you were to declare
yourself bankrupt then all the equity in your property would be available.
Therefore to
ensure this you need to remortgage or extend the arrangement by no more than
12 months.
The amount to be introduced into the IVA is based on what you will realistically
be able to obtain. As your credit rating will be affected by the IVA you
will only be able to raise 85% of the value of the property. So for example
if your
property is worth £100,000 and your mortgage is £80,000 you will
need to introduce £5,000 in the final year of the arrangement to bring
it to a conclusion.
IVA's that involve a property quite often end early with clients wanting
to bring the arrangement to an early conclusion by remortgaging their property
and introducing
a lump sum. Your situation will be reviewed throughout the arrangement
and it will be discussed with you how the arrangement can
be completed early.
For example you may
offer
5 years of contributions of £300 per month plus a sum to entered in year
4 of around day £10,000. By the end of year 3 you will have contributed £10,800
out of a total of £18,000. The balance you still have to pay would be £18,000
- £10,800 plus the equity of £10,000 = £17,200. Your property
may have increased in value and you can remortgage say £15,000. Because
there is a saving on the arrangement fees, your creditors would probably accept
a final settlement of around £14,000 or £15,000 to bring the
arrangement to an early end.
If you decide to go ahead with an IVA then your insolvency practitioner will
be your Nominee, the person you have nominated to propose the arrangement.
If it is approved they will then become your Supervisor and ensure that the
IVA
is successful and also that money is returned to your creditors.
The main benefit of the IVA is that it will allow clients with serious solvency
problems breathing space to carry life with some semblance of normality and
will bring tremendous relief from the stress of debt.
An IVA is a legally binding arrangement with your creditors and requires
financial discipline. You are bound into it for a period of usually five
years. If, during
this time, your contributions fall 2 months into arrears this will be classed
as a default and your IVA could fail. As such it is important that you keep
in touch with your Supervisor and inform them of any change in circumstance
and they
will endeavour to do everything we can to make your IVA succeed.
A six monthly review will be undertaken on your arrangement to ensure that
everything is proceeding as it should and every year we will conduct Annual
review. At this
annual review you will be asked to complete a new income and expenditure
and any increase in salary you've had, you will have to contribute 50% off.
However
if your expenditure has also increased, then this may counteract it. You
will also be obligated to pay 50% of any bonus' or commissions you receive
into the
IVA.
Click here for to see if you could qualify
for an IVA>>
|
|
|
 |
|
