The IVA In recent years there has been an explosion in cheap credit and low interest rates which has contributed to greater numbers of people getting hopelessly into debt. Collectively British consumers owe more than Ј1 trillion on unsecured lending such as mortgages, credit cards, loans and overdrafts. The governor of the Bank of England remarked in May 2006, that Britons’ spiralling levels of debt could create difficulties for the economy in the future.

What to do when debt spirals out of control?

IVA (Individual Voluntary Arrangement) procedures were first introduced by the government under the Insolvency Act 1986 and were put in place as an alternative to bankruptcy.

The legally binding procedures are designed to help people when debt spirals out of control and enables an individual to put forward a deal (the proposal) to the people it owes money to (creditors).

The purpose of an IVA proposal is to demonstrate to creditors that they would be better off if they accepted an individuals IVA proposal, in comparison to the individual being made bankrupt.

A typical IVA agreement will see a creditor / lender agree to write off a proportion of the debt owed to them which can be as much as 75%. In return the debtor agrees to pay a fixed proportion of their monthly income towards the debt for a period of five years.

Although the IVA procedure is much simpler and easier than bankruptcy, they should not be considered an easy option and for some bankruptcy might be a more suitable option.

An Individual Voluntary Arrangement is legally binding; it must be legally approved and supervised by a licensed Insolvency Practitioner.

Simply complete our no obligation enquiry form to get FREE professional and impartial advice from a licensed Insolvency Practitioner, so you can be sure that you have all the facts and are choosing the best debt management solution.

An Insolvency Practitioner will initially assess your financial circumstances in order to make an assessment as to whether an Individual Voluntary Arrangement is the right path for you. You'll get a FREE impartial consultation to determine the best solution to your debt problem.

1. Preparation of IVA proposal

If it is determined that the Individual Voluntary Arrangement route is the most appropriate route for you, the first step will be the preparation of your IVA proposal. An insolvency practitioner will prepare a statement of your affairs which will contain details on your personal circumstances, current financial situation and how you propose to repay your debts.

The Insolvency Practitioner appointed to your case will collect information from you such as the background to the debt, the number and details of your creditors (people and companies you owe money to), what assets you have, your monthly income and expenditure.

Based on this fact find, the Insolvency Practitioner will draft a proposal to your creditors detailing how much you propose to repay each month. With an IVA all your current debts will be combined and you will make one monthly repayment which will be set at a realistic level you can afford without discomfort, and at a level which will enable you to keep up the payments for a period of five years.

Once the proposal has been finalised you will need to read it and sign it once you are totally comfortable with its contents.

2. Interim order

When the IVA proposal has been finalised and approved by you, the insolvency practitioner will file an Interim Order with the court in order to protect you from bankruptcy proceedings or any other legal enforcement.

3. Copies of IVA proposal sent to creditors / creditors meeting held

Copies are sent to each of the creditors once the IVA proposal has been signed by yourself (nominee) and also by the Insolvency Practitioner who is appointed to your case. The creditors are given around two to three weeks to review and respond to the proposal.

A meeting of the creditors is then held to vote on the proposal. The Insolvency Practitioner assigned to your case acts as the chairman of this meeting. There doesn't tend to be a real meeting, usually creditors cast their votes in advance by fax or by post.

Creditors have the option to 'Approve', 'Reject' or 'Approve with modifications'. If 75% (by value of debts) creditors who vote approve the IVA, then it is approved for all creditors.

4. Approval

If the IVA proposal is approved it will run for a five year (60 month) period. During this time you will make payments on a monthly basis into a fund which is supervised by the Insolvency Practitioner. The monthly amount you pay will be divided amongst your creditors. No further interest will be charged and providing you stick to the agreement, at the end of the 5 year period, any outstanding debt will be written off (which could be as much as 75%, depending on your circumstances) and you will be free of debt.

Simply complete our no obligation enquiry form to get FREE professional and impartial advice from a licensed Insolvency Practitioner, so you can be sure that you have all the facts and are choosing the best debt management solution.