I sat down to write this weeks IVA blog and after a while it became clear that it is impossible to give you detailed information on them in one blog without it being far too long. I therefore decided to turn this week into an IVA themed week. Every day I will be posting a new blog about IVA’s so by Friday you will have all of the information that you should need. At the end of the week I am hoping to do a question and answer session, so any questions that you have please send them in.
Remember we are on Facebook, where there will be an on going discussion throughout the week so you can join in at anytime. You can also follow us on Twitter and send questions to me that way.
I thought a good place to start today would be with an introduction and a look at the process of an IVA.
An IVA or Individual Voluntary Arrangement as it is otherwise known is a legally binding agreement between you and your creditors. An IVA usually lasts for five years; however it can be longer depending on any modifications your creditors may put forward at the time of the IVA being approved. To be able to consider an IVA you must be insolvent, meaning that you assets can not be of higher moneytary value than your debt. The main asset that would need to be consider would be your property, if the equity is more than you debt you are solvent, if it is less then your are insolvent and could therefore possibly do an IVA.
There are so many other things to talk about and consider with an IVA so I am going to break it down as best I can.
Simply put an IVA works by you and your creditors legally agreeing to a payment amount and payment term. The payment amount is your surplus after your income and expenditure have been calculated and the payment term will be set at 60 months, but creditors can ask for an extension of 12 months in some circumstances but I will explain this more in a later section. For an IVA to be approved your creditors will be asked to vote of your IVA. In order for the approval more than 75% of the monetary value of your creditors must accept the IVA
Meaning that if you owed £10,000, you owed £3,000 to one creditor, £2,000 to another, £4,000 and £1,000 to another, all of your creditors approved your IVA apart from the last creditor who you owe £1,000 to your IVA would be approved based on 90% of your debt have agreed. Therefore ALL creditors will then be bound by the IVA including the creditor that voted against the IVA.
Once your IVA has been approved, you will be required to send you payments each month for the funds to be distributed to your creditors. You case will be reviews annually to make sure that payments are still affordable or make any changes that are needed.
Similar to a DMP, for an IVA your income and expenditure will be calculated to give you a surplus. The difference for an IVA from a DMP is that you are required to send in proof, firstly of your income and then for items in your expenditure. Usually only your basic salary will be used for the IVA, and the main reason for this is because any additional income may not be guaranteed and therefore the IVA wouldn’t sustainable if it was included. Usually you will not need to send in proof for everything in your expenditure, the main things that you may be asked for are:
*mortgage/rent
*mortgage redemption statement
*council tax
*gas/electric/water
*petrol/diesel
*benefits such as child tax credits, working tax credits, housing benefit, council tax benefit
*creditor balances and agreements
*child care
*child maintenance
The reason why proof is asked for is because all IVA’s are regulated and therefore it has to be shown that everything is being monitored.
Once all of this has been collected the information will be used to draw up your IVA proposals. Your IVA proposals are the legal document that will detail all of your creditors, plus your budget, your circumstances plus all of the legal notices and terms and conditions for the IVA. Before anything can be done with these documents, you will be asked to read through them thoroughly before signing then and sending them back.
Once these have been received, your IVA meeting can be arranged.
This term may be used a lot in the process of drawing up your IVA proposals. What is being referred to is the amount you are paying back to your creditors; if you owe £35,000 and your monthly payment is £200 then your dividend would be 20% because for every £1.00 you owe you will be paying 20p.
The creditors meeting sounds a lot scarier than it needs to. It isn’t all of your creditors sat around a table discussing your future in front of you. Your proposals will be sent to all of your unsecured creditors asking them to vote either in favour or against. A meeting date will be set so your creditors must submit there vote before the set time on the day. They usually submit their votes by fax or post. As your creditors do not attend the meeting, you do not have to. After all votes have been received we will call you to notify you of the outcome.
It is at this stage where your creditors can ask for things within the proposals to change and these are usually referred to as modifications.
All IVA’s charge fees. The fees charged within an IVA can depend on who is dealing with the IVA for you. All IVA’s will have fees for the Nominee and Supervisor costs, their then may be additional costs to the company. With Payplan, we only change what we have to, the Nominee and Supervisor costs. The nominee costs are for all of the work getting your IVA proposals together and everything up until the creditors meeting. This is a fixed sum and will be around 15% of the total fees. You will then have the Supervisors costs which are the charges to maintain the arrangement, these fees are usually around 40% of the total amount you pay into the IVA after 60 months.
Their will then be a few additional items to add on top of that which are VAT, the cost of arranging the meeting and any out of pocket expenses.
All of the details of the fees are detailed in your proposals so you can clearly see what they are.
You will never be asked by us to make any upfront fees; all of the fees detailed above will be taken out of your monthly payments. Therefore when your proposals state your monthly amount, you will pay only this for the fees and to your creditors.
Payplan would only ever ask for the fees on top of you payments, if you were in a position to repay your debts in full.
You may have seen these names mentioned a couple of times throughout this blog already so let me explain who they are. They are the legal names for the Insolvency Practitioner who will be authorised to work on your behalf. The Nominee will oversee the first stages of the IVA, getting the information together and getting the proposals drawn up. They will also oversee the creditors meeting being arranged. Once your IVA is approved they will then become your Supervisor. As your Supervisor they will oversee the length of the plan to make sure everything runs smoothly and that they terms of the arrangement are kept.
Come back tomorrow where I will be discussing your assets in an IVA.
Don’t forget you can find me on Twitter and Facebook
Written by davemac on January 10th, 2011
Filed Under Debt News | Trackback | 1 Comment
iva online says such a nice and informative article on Individual Voluntary Arrangement. thanks for sharing
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