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An Individual Voluntary Arrangement (IVA) is a formal debt solution that was introduced to help people with large unsecured debts.
It gives people the opportunity to pay what they can afford for a fixed period of time (usually 5 years) with any remaining debt written off after that period. An IVA is legally binding and will provide a person guarantees such as reassurances to protect assets including your home.
You can include all types of debt into the arrangement including previous years Council Tax arrears, water arrears, overpayments of benefits and income tax arrears.
On acceptance of an IVA you will receive the following benefits;
As well as benefits there are some downsides which need to be considered before entering into the scheme;
An IVA takes approximately 8 weeks to set up. Here at Holmes we do not charge any setup fees which means you can continue on with any arrangement you have in the meantime whilst we setup your IVA in the background. Once your IVA have been accepted it then supersedes any arrangement you have in place with your creditors.
Our advisors at Holmes are experienced, non-judgemental and will guide you through all your options.
You need the help of a Licenced Practitioner (known as an “IP”). The IP has an important role to play. They put your proposal to your creditors and have to take both your creditors and your best interests into account. The proposal they compile covers their recommendations on your IVA and also advises on your suitability. Assuming everything goes to plan there are a few steps in the proposal:-
An IVA is a common debt solution. It’s a legally binding contract between you and your unsecured creditors. The terms of the proposal are tailored to your own personal circumstances. Under the rules and regulations of the Insolvency Act 1986 the arrangement binds all creditors. If the creditors accept your proposal, the IVA will be implemented.
Your creditors would normally expect you to pay your ‘Disposable Income’ (What you have left after you have paid all your essential living costs) into the scheme. Any additional overtime and bonus may also be taken into consideration depending on earned amounts. The creditors would request that you pay as much as you a can reasonably afford each month.
As long as you fulfil the proposal none of the creditors included in the arrangement can commence or continue legal proceedings. Provided you maintain the payments you are legally protected against any further recovery action or additional monies being added to your debt.
Assurances may be agreed to protect your home. Homeowners may be required to contribute some of the equity in their property, but it is unlikely you would ever be forced to sell your home in an IVA.
As long as the proposals have been successfully maintained any unsecured debt which was included in the IVA is written off. Those creditors in question have no further claim against you.
An IVA is beneficial if you don’t have sufficient income left over after your bills are paid, when creditors are applying too much pressure and/or when it would take you an unacceptably long time to repay your debts. Those who have embarked on the scheme say it’s one of the best things is that they have a finishing line as the term is fixed (usually 5 years). Other advantages of the scheme are:
To have a successful IVA it needs commitment and desire to see it through.
If you are considering an IVA then you will be facing financial difficulties. In many cases the benefits far outweigh any other alternatives to you.
An IVA can produce better returns to your creditors than alternative arrangements such as bankruptcy and your proposal should demonstrate this.
You will not be charged any set up fees by Holmes Financial Solutions. Any fees associated with the IVA will come directly from the monthly payments that you make. Included in the repayments are fees which are taken by your supervisor, these are nominee fees, supervisor fees and costs. Remember, these are included in your agreed repayments and not on top of.
If you can’t maintain the payments then the arrangement is usually declared to be in breach. Depending on the type of breach you may lose some of the protection given to you by the IVA. If your circumstances do change, your IP may be able to apply to your creditors to vary the term of the arrangement to prevent it from failing.
Experience shows that people are often able to obtain credit once their debt problem has been dealt with, but this will obviously depend on the lender you apply to. Having successfully completed an IVA will undoubtedly stand you in a better position than you would be in if you had gone bankrupt or not dealt with the debt problem at all.