About...Individual
Voluntary Arrangements
Individual Voluntary Arrangements (IVAs) potentially deliver the dual
benefit of immediately improving your cash flow and writing off part of
the debts you owe. Introduced by the Government Insolvency Act of 1986,
over the last few years these arrangements have become a favoured way of
dealing with significant levels of debt.
For you, the benefits of cash flow improvement and debt reduction
are immediate and obvious. These arrangements are however also
beneficial to your creditors. The creation of an IVA will offer your
creditors upwards of 25 pence for each £1 you owe. This is considerably
less than you owe but may be significantly more than your creditors will
get if you ultimately become bankrupt.
Situations which favour an IVA
The typical circumstances which need to be satisfied before an IVA
become a relevant option to consider include:
A requirement to have significant debts. In practical terms this means
unsecured debts in excess of £12,000.
A regular household income.
Once your personal expenditure has been met
(excluding payments to your creditors) you will need a sum of money to
pay to your creditors. In most circumstances (but not all) you will
typically need to have at least £250 per month left over after paying
all your priority debts and household bills.
Priority debts
Priority debts include mortgage payments, rent, tax arrears, council tax
demands, and court fines.
Payments to an IVA
In determining what you can pay into an individual voluntary arrangement
the start point is to prepare an income versus expenditure plan. This
needs to be an honest appraisal of how much you genuinely spend each
month to cover your day to day living expenses. In calculating the
numbers, costs which you may incur annually or half yearly for things
like car tax, car insurance, water rates etc need to be spread evenly
over twelve months.
Importantly when you have identified all your expenditure you then need
to add one more 'line item' of expenditure. Typically you need to have a
contingency amount of money per month for the things we cannot predict.
In establishing an IVA a rule of thumb is to add £50 per month for this
contingency.
When you have completed your workings you should have a clear line of
sight as to what (if anything) you should have left over per month. If
this is more than £250 per month it may be possible to consider an IVA.
In calculating the actual amount this needs to be determined by an
Insolvency Practitioner.
Mechanics of an Individual Voluntary
Arrangement
The process of an IVA is in practical terms quite straightforward. The
process starts with an Insolvency Practitioner together with part of
their drafting team reviewing your income and expenditure. They are not
making any judgments about your spending they are simply looking to
establish whether it is feasible to consider this financial tool or not.
The culmination of this first part of the process is for the insolvency
practitioner to identify what you could potentially pay per month to
your creditors.
With the data gathered the insolvency practitioner will prepare a
proposal. This proposal is an attempt to balance your need to get your
financial life back on track and the creditors need to get some of their
money back. The proposal once drafted is discussed with you to ensure it
is both accurate and is something which you feel you could live with if
agreed by your creditors.
Once you agree to a proposal the Insolvency Practitioner will approach
the courts. The courts will then order a creditor meeting to be held
within four weeks. At this point all your creditors are sent a copy of
the proposal for them to consider the offer.
Where a creditor meeting is held (in reality these meetings are virtual
with most communication occurring by fax in advance) your creditors will
either agree, disagree or agree but with some modifications. This may
result in a subsequent proposal being drafted.
Once a final version of the proposal has been created all of your
creditors vote. If 75% of your creditors by value agree to the proposal
it is passed and the insolvency practitioner will report the outcome to
the court. At this point both you and your creditors are bound by the
terms of the proposal.
Once set up you then need to make regular monthly payments into the IVA.
These payments are made to the Insolvency Practitioners who distributes
the money to your creditors. Once these payments have been made for the
agreed period - typically five years your IVA will be concluded and any
debts outstanding will be written off.
Source: Direct Debt Advice July 2006
We are able to introduce our customers who may
need the services of an Insolvency Practitioner to set up an IVA to
Direct Debt Advice. Their insolvency practitioners have helped literally
thousands of customers with the challenge(s) of debt.
Their services are Free and confidential. At no point are you expected
to part with a penny. Unlike most other insolvency practitioners, their
fees are solely paid by an agreement with your creditors. To discuss
your situation for free and without obligation, either call
0800 1 77 77 85
or
complete a Quick Enquiry Online in complete
confidence.
