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An
Individual Voluntary Arrangement (IVA) is legally binding solution to
personal debt problems governed by the Insolvency Act of 1986.
Anyone can consider an IVA to solve debt problem provided debt is above
£15,000 and have 4 or more different creditors. Certain types of debts may
need different approach.
A Licensed Insolvency Practitioner (IP) by law has to prepare IVA
proposal. A full review of financial situation will be carried out to
calculate realistic and fair monthly offer to all of the parties
concerned. A formal written proposal will be drafted for the creditors
detailing all the debts and the period of time. Once agreed, the document
will have to be signed by the debtor, witnessed by a solicitor or a
commissioner for oaths.
Proposal will be distributed to Creditors for
approval. No amendments to the proposal can be made without debtor's
agreement. The creditors will have an opportunity to discuss the proposal
at a prearranged meeting. The proposal becomes legally binding for all the
creditors provided 75% of the value of the creditors accept the offer in
writing or in person. Once the offer is approved by the creditors, it has
to be register at a local county court and all the creditors and the court
are formally informed of the result of the meeting. Insolvency
Practitioner is normally appointed as the supervisor of the Arrangement to
monitor monthly contributions, supervise the disposal of any assets and
fulfil creditors' requirements. The whole procedure will normally be
completed within six weeks.
Once the IVA is agreed, the creditors are no longer allowed to demand
payments by any means. All types of contact from creditors are stopped by
law. The IVA is legally binding on all the creditors. The creditors can
not add further interest, charges or make sudden changes or demands on the
accounts covered in the IVA application. Creditors are not allowed to take
further legal action such as County Court Judgements as long as the terms
of the arrangement are maintained.
The agreed payments must be made to the Insolvency Practitioner to
distribute to all creditors on a pro-rata basis in accordance with terms
agreed and until the successful completion of the IVA period. The payment
has to be maintained to avoid the failure of the IVA. Failure of payments
must be avoided at all costs. Contact Insolvency Practitioner immediately
if difficulty arises in making the agreed payments to re-negotiate with
creditors.
IP will normally conduct reviews regularly once a year to check
circumstances and ability to maintain monthly payments. If circumstances
have not changed, then payments are continued as normal. If for any reason
situation have improved then monthly payments will be increased
accordingly.
If for any reason monthly payments cannot be maintained for a short
period, it is possible to agree with the IP to add the payments for the
miss out period at the end of the agreement. Creditors often stipulate
that no more than one or two payments can be missed during any 12 month
period.
Should the circumstances changes for worse during the IVA period due to
lose of job, change job for less pay due to unforeseen circumstances,
hospitalisation etc and payments cannot be maintained, IP can ask
creditors to consider to vary the terms of the proposals provided regular
payments are maintained. It will be at Creditors discretion to accept such
changes.
Somehow, if payments cannot be resumed, IVA will obviously fail. Creditors
will evidently take further action. An alternative arrangement will have
to be made to avoid supplementary actions that may be taken by the
creditors.
The IVA proposals allows an agreement with your creditors to make a single
reduced minimum payment of £200 a month to settle debts within a fixed
period of time, normally 5 years (60 months). The repayments are
calculated taking into account assets, liabilities, income and the cost of
living expenses. Personal debts to the Inland Revenue and VAT can also be
included but may be treated preferentially within the proposal. All
interest and charges are frozen. After the successful completion of the
IVA arrangement, any outstanding balances are written off. This is known
as a composition of debt. However cash windfall or lump sum is received
while in an IVA, it may be possible to offer your creditors a settlement
figure and complete the arrangement sooner.
It is important to note that the property owner with an endowment policy
linked to the mortgage will be expected to cash it in and pay the proceeds
into the arrangement. Similarly if there is equity on the property or any
other significant valuable assets, some or all of the equity will have to
be released most likely at the end of the arrangement to pay the
creditors.
Once IVA is undertaken Store or Credit cards will not be allowed during
the IVA period any such cards will have to be destroyed or return back to
the appropriate owner. . Furthermore,
additional unsecured borrowing will not be allowed again until IVA
arrangement is successfully completed. It may however be possible to
change an existing mortgage or to take a new mortgage while in an
IVA but make sure to get advice form Insolvency Practitioner. Credit
rating will be repaired quicker by undertaking IVA and does not mean
Blacklisted for ever. Once IVA is successfully completed credit rating
will be restored and you will be able to borrow again.
When IVA is undertaken, it is a private matter between debtor and
creditors. IVA is not published in the local new papers or in any other
media. No-one is informed about the IVA except the creditors.
Professionals such doctor, solicitor, accountant, company director, member
of the police, armed forces etc can carry out an IVA without any adverse
effects to the job.
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