FAQ - IVA

1. What is an IVA?
An IVA is an Individual Voluntary Arrangement. It's an agreement whereby you arrange to pay one regular and affordable monthly payment to your creditors, typically over a 60 month term. Once the agreed term has been completed, you will be debt free as any outstanding debt will be written off. IVA’s were introduced by the Government as part of the Insolvency Act 1986 and are legally binding on all parties involved.

2. Is an IVA for me?
If you are in severe debt and are finding it difficult to meet you monthly repayments an IVA could be an effective solution and put your mind at rest.

If you have:
- £ 12,000 or more of unsecured debt
- 2 creditors or more
- a surplus income of at least £ 120 per month (after paying all household bills including any secured loans)
- a desire to avoid bankruptcy

an IVA could be the solution you need.

3. Why do I need debts over £12,000 and contributions of £120 per month to apply for an IVA?

Applying for an IVA is an intricate legal process and can only be undertaken by a Licensed Insolvency Practitioner. The costs involved to set up this process are quite high and Harrington Brooks are paid an agreed fee from your monthly repayments

4. How will my IVA work?
Harrington Brooks will do all the work for you giving you all the reassurance you need. We will contact all of your creditors through a series of telephone meetings if required and will prepare a detailed IVA proposal. Once you have accepted the proposal, it will be sent to your creditors so that they can make a decision to accept or decline. If they accept, the IVA will then become a legally binding contract between you and your creditors.

5. Will I lose my home?
You will not have to sell your share in your home or indeed any other assets amongst your creditors. With an IVA your mortgage, and other secured payments will take priority which means that these debts are paid before any of your IVA contributions are taken. Therefore your home is safe.

If you are a homeowner there may be a requirement for you to remortgage towards the end of your IVA and introduce additional funds into your IVA if you have equity in excess of £5,000 in your property.

6. Will my IVA include all my debts?
An IVA is a payment plan which allows you to make reduced payments to all creditors with whom you have unsecured debts. If you owe money which has been secured against an asset (home, car etc) and fail to meet your monthly repayments creditors can enforce the sale of those particular assets. Therefore an IVA will include all unsecured debts only.

7. How long does it take to set up my IVA?
An IVA takes approximately 4 to 6 weeks to set up because it is both a complex financial and legal process. In some cases, where the scenario is highly complex this can take a little longer

8. What or who is a licensed Insolvency Practitioner?
A Licensed Insolvency Practitioner is a person who holds a licence to deal with all insolvency procedures.

Many Insolvency Practitioners were previously Accountants or Lawyers who have passed additional examinations in order to qualify as an Insolvency Practitioner. This allows them to apply insolvency legislation to individuals and companies.

Only Insolvency Practitioners are allowed by Law to propose and administer IVAs.

9. How long will my IVA last?
In typical circumstances an IVA term is 60 months.

10. Will my IVA stop creditors from chasing me?
If your creditors are chasing you for repayments before your IVA is agreed and accepted by all parties, your Insolvency Practitioner can help. If necessary, they can apply to a County Court for something called an ‘Interim Order‘ which means that your creditors can’t continue or start new debt recovery proceedings against you. These Orders are not required in most cases but if obtained the Order will remain in place until your IVA proposal is agreed with all of your creditors. The IVA itself then provides you with protection from your creditors.

Once your IVA has been agreed and accepted by all parties, and with the provision that you make your regular monthly repayments, creditors will not be allowed to take any action against you or indeed contact you.

It is always important to remember however that your creditors are often large multi-national companies, and news of your IVA can often take some time to filter down from one department to another. However, it is a legal principle of your IVA that creditor contact should cease.

11. Will people find out about my IVA?
An IVA is a private legal agreement between an individual and their creditors. It is intended to be completely confidential. Details are however published on a register maintained by the Department for Business Enterprise and Regulatory Reform, a government department, for purposes of allowing banks, credit card companies and other finance companies to conduct legitimate credit checks.

12. Can I still keep my business?
Yes is the simple answer, however, this is a complex area. Self employed people can qualify for IVA’s. If you are in this situation, please contact us so that we may discuss this in depth with you.

13. Can I keep my bank account?
You may keep your bank account if it is in credit but if you have an overdraft this debt will be included in your IVA together with your other debts. You will be able to open another account with a bank that you do not owe money to.

14. Can I apply for an IVA if I have been made Bankrupt or I have a CCJ?
If you have been adjudged bankrupt you may still apply for an IVA. Once you apply for an IVA our Insolvency Practitioner will contact the appropriate authorities and Courts. Our Insolvency Practitioner will discuss and negotiate with all of your creditors and show that it is in everyone's best interests to proceed with an IVA instead of bankruptcy. If this is accepted, your bankruptcy will be annulled once your IVA has been approved.

If you are not bankrupt but one or more of your creditors has obtained a CCJ against you, you can still proceed with an IVA. Creditors who have obtained CCJs have no priority and are treated exactly the same as all of your other creditors.

15. What if I cannot afford my IVA payments anymore?
If you are beginning to struggle with repayments or if your personal or financial circumstances change we would advise that you contact your Insolvency Practitioner immediately. IVA’s can be varied in such circumstances. Also, if the issue is a short term one, emergency payment breaks may be granted at the discretion of your Insolvency Practitioner. If you do miss any payments without the Insolvency Practitioner's permission there is a risk that your creditors could start bankruptcy proceedings against you.

16. Will an IVA adversely affect my credit rating?
An IVA will affect your credit rating but your rating is more than likely to be damaged already as you have borrowed too much and have run into difficulties.

An unfavourable credit rating will affect your ability to borrow more debt, however at this point you should not be thinking about borrowing any further funds.

If you have taken an IVA this will remain on your credit file for 6 years even though an IVA term is 5 years. After the 6 year period all details of you having an IVA will be removed from your credit file and your credit rating should start to repair.

17. How much will an IVA cost me?
Fees charged for the implementation and monitoring of your IVA are paid by deduction from your monthly repayments at an amount agreed with your creditors.

18. How much will my creditors want from me?
Each case is reviewed independently. When deciding to accept or reject an IVA proposal, creditors will want to ensure that the amount you are proposing to repay is fair and affordable to you. For many items of expenditure, food, clothing etc. agreed national guidelines are used; for other items such as mortgage, rent and utilities, the actual amounts payable are included.

19. How much can I afford to pay into my IVA each month?
Our Insolvency Practitioner will discuss your household income and expenditure. At this point no unsecured debts have been factored in. By deducting your expenditure from your income you are left with ‘residual‘ or ‘disposable‘ income which is the funds from which you pay contributions to your unsecured debts.

In the example detailed below we would expect you to make a contribution to your IVA of £250 to repay your unsecured creditors.

Monthly Income		Monthly Expenditure
Your take home pay	£1,200	Mortgage / Rent	£700
Partners take home pay	£690	Council Tax	£100
Other income (benefits, maintenance)	£100	Water / Gas / Oil / Electricity / Phone / Mobile	£100
		Food/Household/Clothing	£600
		Car Expenses / Finance	£190
		TV License/Rental/Sky	£30
		Public Transport	£20
Total Household Income	£1990	Public Household expenditure	£1740
Monthly disposable income	£250

 

20. So how much debt is written off?
Each case is unique and what your creditors accept depends on your personal financial circumstances.

Example of Debt Write off:
Your unsecured debts	£30,000
Contracted Monthly Payment	£750
Disposable Income	£250 (from the above example)
No. of months in your IVA	60
Contributions to your IVA	£15,000 (£250/month x £15,000)
Debt written off	£15,000 (£30,000 - £15,000)
Fees	£3,000
Amount available to your creditors	£12,000 (£15,000 - £3,000)
Debt written off	£18,000 (£30,000 / £12,000)
Debt written off	60% (£18,000 / £30,000)

You will find a number of companies, especially on the internet, claiming that they can write off up to 75% of your debt. Whilst the words "up to 75% of your debt is written off" may be true, it is not the whole truth. At Harrington Brooks, we don't hide behind the words "up to". We have proposed IVAs with 80% of debt written off, but the norm is between 50-60%. We advise that you ignore companies who claim to write off up to 75% of your debt.

21. Is an IVA service regulated by anyone?
Insolvency Practitioners are licensed to practice by one of the following bodies who ensure their compliance and regulate the service
- Association of Chartered Certified Accountants (ACCA)
- Institution of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants Scotland (ICAS)
- Secretary of State for Business, Enterprise and Regulatory Reform (BERR)
- Insolvency Practitioners Association (IPA)
- The Law Society

22. Can I finish my IVA early?

Yes, this is possible. If you wish to make a lump sum payment towards your IVA Harrington Brooks can arrange a variation meeting with your creditors to offer it and to confirm any final settlement.

If you receive a 'windfall' payment (such as an inheritance) there is a clause in your IVA contract which states that you will be required to pay those funds into your IVA, which is only fair as your creditors agree to freeze interest and charges to allow you to write off a large proportion of your debt.

23. What if one of my creditors does not agree to my IVA?
In order to have an IVA approved, the proposal needs to be accepted by 75% of the creditors voting (by value of debt owed). For example if you owe £40,000 and every creditor voted, then you would require £30,001 of your creditor votes to be in your favour.

If the creditor refusing to accept your IVA is owed more than 25% of your debt then your IVA proposal is void.

Insolvency Practitioners would not normally proceed with a proposal which is unlikely to get sufficient votes as this would have adverse effect on their own reputation. Therefore, if your Insolvency Practitioner agrees to progress your IVA proposal there is a good chance that it will be accepted.

If the creditor refusing to accept your IVA is owed more than 25% of your debt then your IVA proposal is rejected.

Insolvency Practitioners would not normally proceed with a proposal which is unlikely to get sufficient votes as this would have adverse effect on their own reputation. Therefore, if your Insolvency Practitioner agrees to progress your IVA proposal there is a good chance that it will be accepted.

24. My IVA has been rejected, how much do I owe you?
We specialise in IVAs and we are very successful in getting them accepted by creditors. Therefore Harrington Brooks will cover all the costs of the risk of the very few rejections that occur. Therefore if your proposal is rejected you will not owe us anything.

25. Can I cancel my IVA?
If you find for any reason that you simply cannot continue with your IVA at any point it can be terminated. Termination will mean that any funds received to date will be distributed to your creditors and they will be able to commence alternative debt recovery action against you.

26. Will I still receive letters from my creditors?
You may receive some correspondence from Creditors while the IVA is being processed, however, once your IVA has been agreed and been in place for a few months you should not be contacted anymore.

27. What is the minimum number of creditors required?
For an IVA you will have 2 or more creditors.

28. I want to do an IVA but my creditors are already taking me to court?
As soon as the IVA proposal is prepared all Courts will be notified which is usually enough to stop any legal proceedings. If this does not happen your Insolvency Practitioner will write to the Court and the creditors on your behalf.

29. What will happen when my IVA agreement is over? If the terms in your IVA proposal have been met, then your creditors have no further claim against you and all outstanding debts will be cleared.