What is an Individual Voluntary Arrangement? Blog 3 ~ Debt Managements and Consolidation

Written by Lizzy on Wednesday 12 January 2011

Hello and welcome to day three of this week’s IVA themed blogs. Today I am going to be talking about creditors; the different types, how they deal with IVA?s and what they do to approve your IVA.

An IVA will only include all of your unsecured creditors. Your other creditors will have to be dealt with separately; each creditor is different so hopefully I will explain all you need to know below.

Unsecured ? these are debts where a credit agreement has been signed where you have an agreement to make repayments towards what was borrowed until it is paid in full. They will all be included and bound by the IVA agreement.

Secured ? these are debts that have a charge over an asset in the event that the agreement of payment is not met. They will be listed in the IVA as creditors however you will maintain your contracted payments to them until the amount you owe is paid back in full. The agreed payment amount will be included in your expenditure to ensure you have enough funds to cover them.

Associated ? these are debts where no credit agreement has been made, it is uncommon for these to be included in the IVA. Creditors will expect any associated creditors to stand aside for the duration of the IVA. Any associated creditors would show up on your IVA proposals and a clause would be added into the terms and conditions to state that they are standing aside.

Preferred ? these are creditors that are to be repaid in full, mainly because non payment could have consequences. These are excluded as if they these where to be included they could either impact there lives in some way. Once again they are listed as a creditor, however a specific payment would be allowed in the budget in order to repay this debt outside of the IVA arrangement. A clause would also be added into the proposals to state why the creditor is preferred.

Contingent ? these are possible future debts and are usually debts that you have guaranteed and could be asked to pay for in the future. These would again be included in your list of creditors, and if during the IVA a contingent debt becomes repayable it would be dealt with at the time.

All of your unsecured creditors are asked to vote for or against your IVA as mentioned in the earlier blog. When your creditors vote on your IVA they can sometimes put forward what are called modifications. Modifications can range from a lot of different things; the most common modification is a cap of the fees that are charged. Other common modifications are uplifts for item in your expenditure that they feel are excessive.

With the modifications that your creditors put forward, you must accept these and if you do not then your IVA would have to be rejected. However if you accept them then your IVA will be approved and all of the changes would be actioned where necessary.

Common Modifications

*Increase in IVA payments due to excessive expenditure. Creditors tend to stick to strict guidelines therefore if they think you are over the guidelines they will ask for the difference. Common areas are for fuel for your car, pensions and life insurance.
*Cap on fees charged. This is nothing that you would need to worry about, as this would not affect you. Your payments and payment term would still be the same; we would just get fewer fees.
*A 12 month extension if your property doesn?t have any equity in it in the fourth year.

Don?t forget to come back tomorrow as I will be talking more about IVAs.

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