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FAQ: The IVA Process

By: Garry Crystal - Updated: 14 Oct 2012 | comments*Discuss
 
Iva Creditors Debtor Insolvency

An Individual Voluntary Agreement (IVA) is an arrangement between debtors and creditors to come to a debt solution. In basic terms it is a way for debtors to restructure their debts so that their creditors receive some money that is owed to them. Here are some frequently asked questions on the IVA process.

How long does an IVA take to set up?

The IVA will usually take between one month and six weeks to set up. The set up time will depend on the IVA company receiving all of the appropriate information from the debtor. It will then be a case of checking the financial statements and eligibility requirements. Timescales vary from company to company but the actual set up process will vary little.

Who do I speak to at the IVA company?

An Insolvency Practitioner will be the person that deals with the IVA process. The Insolvency Practitioner will be the person who collects all of the debtor’s financial proof and checks that the information is true. The Insolvency Practitioner will then formulate the best way to restructure debts on the financial information given. The emphasis with an IVA is to be fair to each creditor but also to make sure that debtors can realistically afford the monthly payment.

Can I read the IVA before creditors see it?

The debtor will need to read and agree to the contents of the IVA draft proposal. If the debtor is happy with the arrangement then they will sign it and it will then be sent to the creditors. The Insolvency Practitioner will also send copies to the local county court and also to the insolvency service. Creditors will review the proposal and vote on whether or not to accept the arrangement.

How long will it take for a creditor’s decision?

Creditors are required to give their decision to the Insolvency Practitioner within two or three weeks of receiving the proposal. At least 75% of creditors will need to vote in approval of the arrangement. If this percentage approve of the proposal then the arrangement will go ahead and will also apply to creditors who voted against the proposal.

So the arrangement will go ahead with no changes?

This is not always the case. Some creditors may be in agreement with the arrangement but they will want specific changes made. If the debtor agrees to these changes then this can then be counted as positive vote by the creditor.

Do I need to meet my creditors?

There will usually be a meeting of creditors to decide the final outcome of the arrangement. In most cases this will not happen in person; most of the votes will be received either by post or fax. The debtor will not usually have to meet with any creditors. In some cases the debtor might have to attend a meeting with creditors if modifications are requested by certain creditors.

How much do I pay my creditors?

The exact amount that will be paid to creditors will be calculated by the Insolvency Practitioner. Creditors will usually require at least 30% of the amount they are owed. The least that will usually be accepted will be around 25p for every £1 owed.

How do I pay my creditors?

The amount you are required to pay will come in the form of monthly payments to the Insolvency Practitioner. The monthly payment will be divided fairly between creditors. This amount will be paid for a set period of time; in most cases this period will be five years. When the IVA has been completed any amount still owed to creditors will usually be written off.

How much will the IVA company charge?

The IVA company will receive its fees from the creditors. The fee paid will be contained in the proposal and the creditors do need to accept this amount as part of the approval process. Basically the amount that is being paid to creditors is reduced by the amount of IVA company fees. Debtors should always be very wary of companies that require upfront fees to set up an IVA.

What happens at the end of the IVA period?

Once an IVA has been successfully completed the Insolvency Practitioner will send a report to the county court, the insolvency service and the creditors. The insolvency service will note the successful conclusion and credit agencies will also be notified of this fact. Any creditors that are owed a remainder of money on debts will need to write off these amounts.

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