An IVA is an agreement between you and the people you owe money to. This agreement is both formal and legally binding, offering specific legal protections whilst the debt problems are being solved. With an IVA you will agree to pay a monthly amount, normally over 60 months. Because of the formal nature of an IVA it needs to be negotiated by a professional insolvency practitioner who is licensed for this purpose.
Once the agreement takes effect, your creditors will cease to apply any further interest or charges on your debts, together with any letters or contact by phone. At the end of the agreed period, provided that you have kept to the arrangement, any debt which is outstanding is written off.
There are certain requirements to comply with in order to qualify for an IVA. There must be a minimum of three creditors and you must show that you are struggling to make payments. The total amount of unsecured debt must come to more than 15,000 pounds. You must have proof of employment.
An IVA can mean that you’ll be considered to be debt-free after 60 months and it can write-off up to three quarters of your debts.
The “mechanics” of an IVA are basically simple. If it appears that it is the right course of action then there will be personal questions to be answered regarding your financial status. Based on that information an insolvency practitioner will come up with a monthly repayment sum which you should be able to afford. Once the paperwork is complete it will be necessary to apply to the court for an Interim Order. This is where you will gain a breather from the pressure as once this order is granted, there can be no legal action taken against you by creditors. On acceptance of the IVA the Insolvency practitioner takes on the role of manager, and they will monitor the IVA's progress to make certain that the terms and conditions which have been agreed are fully adhered to.
In order for an IVA to gain approval, it will be necessary for the people you owe money to (your creditors) to vote for the arrangement. Just one positive vote means the IVA will be approved. If only one creditor votes, however, and it’s a negative vote and the amount you owe this creditor is less than a quarter of your total debt, then the meeting will have to take place at a later date and those creditors who didn’t vote will be asked to do so.
If the negative voter represents over a quarter of the total debts it will mean that the application will fail. The reason for this is that an IVA can only be approved if three quarters of the value of the debt is voted fore. However, if any of the creditors fail to give a vote, then the assumption is that they have voted positively for an IVA.
There is provision for your financial situation to be assessed from time to time, as there could have been a change in circumstances. However, as long as you keep up the repayments through the whole period, the IVA is legally binding and once the agreement ends you will free of all debts and ready to make a complete fresh start as far as finance is concerned.
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