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Your IVA questions answered
This page contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. Before considering an IVA as a debt solution, please make sure you fully understand the risks involved when entering an IVA.
An individual voluntary arrangement (IVA) is a legally binding form of insolvency and has proved a popular solution for problem debt over the last 10 years.
To tie in with the 25th birthday of the IVA we try and answer the most obvious questions you might have if you’re considering the IVA route…
How long does it take to set up an IVA proposal?
All IVAs are individual and set up times can vary. A lot of the time involved in setting up an IVA proposal is dependent on how quickly the client can provide the necessary paperwork for the Nominee.
A complex legal document is drafted and tailored to the individual client’s circumstances. Once the proposal is signed by the client and returned to the Insolvency Practitioner (IP) a meeting of creditors will be set up.
Legally the creditors are allowed up to 28 days to consider the proposal.
Why do I have to provide so much paperwork for an IVA?
The client’s paperwork has to be verified, to satisfy legal requirements.
The Nominee cannot do their job properly without verifying client’s documents. This also helps in having the IVA approved if the Nominee can confirm they have seen the documents mentioned in the proposal.
Do I need to swap banks on an IVA?
If you are banking with an institution that you also have a loan or other credit commitments with you should swap to safe banking facilities. This is particularly important as the bank could take funds from your bank.
If you’re unsure about this ask for assistance from the Insolvency Practitioner or their advisors.
What if all my creditors don’t accept my IVA? Or don’t vote?
An IVA is approved if 75% (in value) of creditors, who vote at the meeting, vote to accept.
This can mean that one creditor with the majority of your debt votes to accept it is legally binding on all creditors.
Most reputable IVA companies would only put forward cases that they considered had a good chance of acceptance.
If creditors do vote to reject, your IP can discuss other alternatives available with you.
I own a property, will an IVA affect this?
You would not be forced to sell your property in an IVA.
6 months before the end of the IVA we will obtain an up to date valuation of your property. Based on 85% of the value at this point we take into account what is still outstanding on your secured lending
Based on this calculation if there is less than £5,000 available you would not have to attempt to re-mortgage and your property will have been dealt with in your IVA.
If there is more than £5,000 available based on that same calculation then you will be expected to attempt to re-mortgage to release this.
However, this is based on your affordability and age because: The cost of the mortgage payment and any repayment vehicle (i.e. endowment) would not increase by more than 50% of the monthly IVA payment.
Any re-mortgage term can not be beyond the later of the state retirement age or your existing mortgage term
Your monthly payment into the IVA would reduce to accommodate the increased mortgage payments, also even if you do re-mortgage as it is based on 85% of the value you would always retain at least 15% of the equity in the property
In the event you are unable to re-mortgage (due to your age, affordability, or you are unable to obtain one), in order to compensate your creditors the IVA could be extended to make 12 extra payments or a 3rd Party could offer a lump sum.
I owe money to family/friends, will they be informed because I’m on an IVA?
If your family or friends have given you money as a gift then they will not be informed. However if you owe them money and want to repay them during the course of the IVA they can be included for a dividend like any other unsecured creditor.
They would also be allowed to vote in the IVA; although creditors may ask that friends and family step aside at the meeting for the benefit of other creditors.
What happens if my circumstances change on an IVA?
IVAs can be varied to include changes in circumstances. Larger changes such as significant reductions in income paid into the arrangement might need approval of your creditors.
What happens if I die during my IVA?
Your IVA will be terminated and you creditors can make a claim in your estate.
If my IVA fails will I have to go bankrupt?
It is unlikely that you will be made bankrupt by your supervisor or your creditors unless your IVA was approved over 3 years ago. However, you may choose to petition for your own bankruptcy after the IVA has failed as a solution to resolve your debt problem.
How long will an IVA stay on my credit file?
An IVA will stay on your credit file six years from the date of approval.
Got another question about IVAs?
Read the StepChange Debt Charity guide to IVAs or post them up below!