Individual Voluntary Arrangements (IVA)
These are formal agreements arranged through a county court to pay off debts. You pledge to pay a set amount monthly, with payments lasting between three and five years. Lump sums may be included in the settlements. In return, creditors will agree to write off a portion of the debt.
An IVA can be a solution, especially for those with reasonably high incomes or lump sums to include in a debt. They are arranged through specialist insolvency practitioners, who will negotiate with creditors and will handle the monthly payments. If you do not keep up payments, you can be made bankrupt.
You can be debt free in just five years and have one affordable payment, but there are many factors to be considered. The following explanations address the most frequently asked questions:
Q. Will I lose my home?
A. Usually in an Individual Voluntary Arrangement the debtor is allowed to keep his house and continue to pay the mortgage. A re-mortgage of your property is required in some instances in order to contribute some funds to the Individual Voluntary Arrangement.
Q. Will the individual voluntary arrangement be advertised?
A. No. Although a bankruptcy order must be advertised, this is not required in an Individual Voluntary Arrangement.
Q. Will my employer be informed?
A. No. The supervisors of your Voluntary Arrangement will not contact your employer unless required to do so under the terms of the arrangement. If your employers are amongst your creditors, they will of course be notified.
Q. What will happen to my pension?
A. It depends on the type of pension that you have. Usually, where you are an employee contributing to your employer's pension scheme, the creditors will allow you to continue to make contributions to the scheme. If you have a personal pension, then the creditors may insist that all further contributions be frozen for the duration of the Voluntary Arrangement.
Q. Where will the creditors meetings take place?
A. This is held at a place convenient for the creditors. A meeting will be called, although it does not always take place. Creditors rarely attend meetings when called and vote instead by proxy.
Q. How long does it take for a proposal to be prepared?
A. We expect to have a proposal prepared and returned to you, after submission to the Insolvency Practitioner, within 14 working days of receiving completed questionnaire. Delays can occur if the information requested is not forwarded to us, or is not complete.
Q. I would rather certain creditors were not informed of the proposal and kept out of the arrangement?
A. The nominee must send a copy of the proposal to all known creditors. You cannot pick and choose whom you pay. If a creditor is to be excluded details must be given in the proposal and the creditor must agree.
Q. When will the meeting of the creditors take place?
A. The meeting will be called for a date approximately four weeks from when you return the duly signed proposal and sworn affidavit to the Insolvency Practitioner. This allows them to forward the paperwork to court, who then return it to the Insolvency Practitioner. Your creditors will have 14 days in which to consider the proposal. If 75% of the creditors, in value not number, accept the proposal it will be binding on the rest.
Q. How are the nominees and supervisors fees paid?
A. The nominee and supervisor's fees are paid out of contributions you make into the Individual Voluntary Arrangement. Generally you do not have to pay any of these fees in advance.
Q. What happens if my monthly bills increase or there is a change in my financial circumstances?
A. The supervisors will monitor the level of your income and expenditure throughout the duration of the Voluntary Arrangement. Such reviews are usually made every 12 months.
Q. What happens if I lose my job or there is a dramatic change in circumstances?
A. There is a provision in the Voluntary Arrangement to call a further meeting of creditors if this proves necessary. In previous cases, where somebody has been made redundant or has become seriously ill, the Insolvency Practitioner has managed to persuade creditors to either extend the period of the Voluntary Arrangement or, in exceptional circumstances, consider the Voluntary Arrangement complete. The important thing is that you tell them as soon as possible when there is a change of circumstances in order that they can do something about it quickly.
Q. Will creditors allow pet insurance / vet bills as part of my expenditure?
A. Yes. Creditors generally accept this as part of your normal household expenditure.
Q. Can creditors pursue me for the balance of the debts after the IVA has finished?
A. No. The purpose of the Individual Voluntary Arrangements is to ensure all known creditors are bound by a full and final settlement.
Q. I have a car on finance What will happen to it Will the finance company repossess it?
A. In most cases your creditors will allow you to keep a car where it is essential, for example, to get you to and from your place of work. The proposal will include a provision that you will continue to pay the finance company their normal monthly instalments. In most cases the finance company will not repossess the car and will continue to collect the outstanding monthly payment
Q. Will my credit rating be affected?
A. Yes. All major credit agencies get a monthly update of all IVAs. They keep a record of the IVA for at least six years from when it commenced. The important thing is to properly maintain your IVA with the supervisor
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