IVA FAQs - Clear and straightforward answers

What is an IVA?

An IVA is the acronym for Individual Voluntary Arrangement. It is a legal alternative for the people in England and Whales, wishing to avoid Bankruptcy and pay their debt. In an IVA the Debtor formulates a repayment plan with the help of an Insolvency Practitioner (or IP, a legal expert), which must be agreed upon by at least 75% of the Creditors.

What are the benefits of an IVA?

It has certain benefits for the Debtor as well as the Creditors:

For the Debtor:
The prime benefit is that you can pay your debts and keep your home i.e. unlike Bankruptcy your home is not at risk. IVA also enables a Sole Trader or Partner to continue to trade and generate income for repayment to the Creditors, proposals are entirely flexible to accommodate personal circumstances, Debtor does not suffer the restrictions imposed by Bankruptcy, such as not being able to act as a director of a limited company.

For Creditors:
For Creditors, the administering of an IVA is significantly lesser as compared to Bankruptcy. They also enjoy certain favors in terms of tax e.g. reclaiming tax and VAT relief.

What are the disadvantages of an IVA?

Well, there is also a downside of an IVA. It usually takes longer than Bankruptcy typically 5 years as opposed to 3 years. During this extended period of time, there is no guarantee that Debtor ’s fiscal status will be the same. If the Debtor faces financial problems and fails to comply with the terms of the arrangement his home and assets can still be at risk if they have not been specifically excluded and mentioned in the terms and conditions agreed upon.

How long does an IVA last?

IVA normally takes five years (60 months) to complete; in some cases it may draw to a close before time.

Which kind of Creditors can be included in an IVA?

IVA includes all the Creditors other than offering secured loans, including Banks, Credit Card Companies, Finance Companies, Stores and Charge Card Companies, Inland Revenue, HM Customs and Excise (VAT).

Who can enter an IVA?

People living in England and Wales with a debt of over ₤15,000 owed to three or more Debtor can enter an IVA. Furthermore, they must demonstrate they don’t have the resources to pay their debts otherwise.

Will I lose my house?

No, unlike Bankruptcy, your home is not at stake to the Creditors. But the equity may be released towards the Creditors in the final year of the IVA. It is in your interest to mention it clearly in the terms and conditions.

What happens if an IVA is not approved?

You may come up with an IVA variation or consider an alternate approach i.e. Debt Management plan or Bankruptcy.

Can I stay in business during an IVA?

Yes, your business stays unaffected; you may also keep acting as a director of a company because IVA does not limit your business activities.

I am a professional. Will it affect my position?

No, your position will not be affected at all. Debtors do not have the right discriminate people from different professions.

Will an IVA become public knowledge?

No, IVA is confidential and even your family members are not informed. Only your IP and Creditors know about the process. But it is good to take your partner and family in confidence as they will come to know about it in the later stages.

Can I enter into an IVA if I have already received a Statutory Demand?

Yes, if the Official Receiver recommends IVA, you can enter an IVA no matter if you have received a Statutory Demand or not.

Can I obtain an IVA if a Bankruptcy Order has been made against me?

Yes, the interim order will suspend any court hearings or petition for Bankruptcy. Your Bankruptcy can be annulled in favor of the IVA.

What happens if I don't keep up the payments on my IVA?

If you fail to keep up the monthly payments, the IVA will fail and the supervisor or Creditor may file a Bankruptcy petition against you. In such a case you could lose your property and assets.

What happens once I finish paying my IVA?

You get a Certificate of Completion within three months of final payment. All of your unsecured debts in the IVA are cleared and you are eligible for obtaining further credit if your credit score allows it.

Can I enter an IVA if I already have CCJs against me?

Yes, you can enter an IVA even if you have a County Court Judgment against you.

Do I have to tell to my partner?

Telling to your partner is not obligatory but you better tell them because it is likely that they will come to know about it at some stage.

Does an IVA cover all of my debts?

No, IVA only covers unsecured debts. To pay your secured debts you have to adopt alternate approaches.

What is the difference between a Secured and Unsecured Debt?

A secured debt is a debt secured against your personal property i.e. your home. Secured debts could include a secured loan, car loan, mortgage etc. An unsecured debt is a loan not secured against any of your assets e.g. a Credit Card loan, Store Cards, Bank overdrafts and so on.

Do Creditors have to accept an IVA?

Creditors may or may not accept your IVA proposal. This decision is made during the Creditors’ Meeting via voting procedure.

Does an IVA prevent the lenders from taking further recovery actions?

Yes, once your IVA is accepted, it is legally binding on all the Creditors involved, no matter they voted in favor, against or abstained, they cannot take further recovery actions against you.

What if my fiscal status changes during the process of an IVA?

If your financial circumstances change and you face more financial hardships, you can come up with an IVA Variation (IVA with an alternate proposal). Likewise, if you have good fortune, you are legally bound to tell your Insolvency Practitioner and there may be a change in the monthly payments accordingly.

Can I quit or cancel the IVA once it is set up?

No, once it is set up, you must comply with the terms agreed upon.

What happens if I just stop paying into the IVA?

Your Supervisor or Debtor will initiate Bankruptcy against you.

How long does it take to set up an IVA?

It totally depends on your circumstances but typically will take nearly 60 days.

Will interest and other charges be frozen while the IVA is being set up?

No they are not frozen but on the other hand any interest and charges will be included in the IVA if it is approved.

Can a Creditor take further recovery action before the IVA is approved?

Yes, the Creditor does have this right. However, you can request the local County Court for an Interim Order to stop your Debtor from any further recovery action.

How start an IVA?

You should definitely talk with a certificated Insolvency Practitioner, a registered debt charities or a licensed IVA firm before starting for an IVA. You must be aware of your financial status and cost involved before proceeding.

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