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IVA Information

What is an IVA?

Legally binding protection

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and your unsecured creditors. Creditors bound by the IVA cannot take action against you provided that you keep to the terms of the IVA. If there is ever a problem making a payment or anything else which may affect your arrangement, always contact your case administrator, they are there to help you and make your arrangement work.

Affordable repayments

Shawcross Williams will assess what you can afford to pay to your creditors and this is what we ask your creditors to agree to. This ensures that your repayments are manageable and is based on certain criteria generally accepted by the industry and creditors voting on your proposal.

Interest and charges frozen

When your IVA is accepted your creditors cannot add any further interest and charges onto your debts and provided that you stick to the terms of the IVA any balance owed after your IVA has completed is written off.

 

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Is an IVA right for me?

It is important that you consider the features and benefits of an IVA. To understand if it’s the right option for you, here is some key information to help.

Once your IVA has been accepted, you could benefit from:

  • Lower monthly repayments to your creditors based on what you can afford.
  • Frozen interest and charges so that your debts do not increase.
  • Full legal protection from your creditors – they cannot pursue you for their debt or take legal action.
  • A fixed agreement usually lasting 5 years, after which any remaining unsecured debts will be written off.
  • An IVA can help safeguard your property and ensure future affordability even after the IVA.
  • Stress free and peace of mind as the IVA will stop contact from your creditors.
  • Enables you to continue to trade if you are self-employed or have a trading business.
  • An IVA can catch unknown debts such as unpaid tax or overpaid tax credits.
  • On the road to debt freedom.

Things to consider

  • If you don’t stick to the agreed terms of your arrangement and you don’t speak to your Insolvency Practitioner or their team your arrangement may fail.
  • If your arrangement fails your creditors could again take action against you and interest may resume on your debts.
  • There are industry guidelines for your expenditure we have to adhere to
  • If you have assets then you may be asked to make these available to your IVA e.g. savings plans.
  • If you are a homeowner you may be asked to re-mortgage your property in the 5th year of your IVA, to release any equity to creditors. There are many situations where a re-mortgage is not required which we can explain to you and if a re-mortgage is not available an IVA can be extended for 12 months which is generally what happens in most cases.
  • An IVA will appear on your credit file for up to 6 years from the date it commences. During this time it may be difficult for you to obtain credit.
  • Creditors can reject an IVA but there are usually specific reasons for this and we can negotiate with creditors or even re-propose the IVA if required, although over 97% of our proposals are accepted.
  • An IVA will be recorded and entered on to a public register but someone would need to be specifically looking for you on it to find you.

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Why use an Insolvency Practitioner?

Insolvency Practitioners are highly regulated and have to demonstrate a wide range of experience before becoming an Insolvency Practitioner.

  • An IP is the only type of debt adviser with the legal power to stop debt recovery proceedings through a formal solution
  • Other debt advisers may offer advice on procedures such as IVA’s, bankruptcy and DRO’s etc but are not qualified to undertake this work and are unlikely to have personal experience of these procedures.
  • Some debt advisers will charge you fees for referring you to an insolvency practitioner. It is quicker and cheaper to contact us directly and we do not charge for our initial advice.
  • Insolvency practitioners are professionally required to evidence in writing their advice to you. Other forms of debt adviser may simply rely on recorded phone conversations which could result in misunderstandings.
  • Insolvency Practitioners are required to provide a bond to safeguard clients’ money which they hold. No other type of debt adviser is required to provide the same level of security.

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IVA procedure

Initial conversation and drafting of your IVA proposal

The first step is for one of our team to speak with you to assess whether you would qualify for an IVA and to explain all the options available to you.  At this stage we will help you to decide if an IVA is the best option for you. If you decide to proceed with an IVA we will then send to you a letter confirming that no up-front fees will be payable. We will also ask you to send in specific documentation to confirm your financial position.

On receipt of your documentation we will contact you again to agree your monthly repayment and other details that will be included in the IVA documentation. We will then send this to you for your approval together with a written document confirming the basis of our advice to you.

Proposal sent to your creditors

On receipt of the signed documents from you we will then write to your creditors to set a creditors meeting date which by law will be at least 16 days’ time later. By this time they must vote for or against the proposal. This meeting is conducted via fax and email. There is no need for you to attend, however you must be available on the telephone on the meeting date so that we can discuss the details of the IVA and if your creditors have proposed any modifications (amendments to the proposal).

Once we have confirmed the approval of your IVA we will then write to your creditors to confirm the terms of the agreed IVA and to advise them that all further correspondence should be addressed to us.

IVA approved

Your next agreed monthly payment will be due within 30 days of the approval of the IVA.

We will make regular payments to your creditors normally on a monthly or quarterly basis once the setup fee agreed with your creditors has been paid.

Annually we will review your case with you to ensure that you can still afford to pay the agreed monthly amount and to confirm that from your point of view the IVA is proceeding satisfactorily. We then report annually to you and your creditors.

IVA completion

At the end of the arrangement we will report to you and all creditors and will issue a Certificate of Completion which confirms that the remaining unpaid debt has been written off. Your name will be removed from the IVA Register within 3 months of completion.

Your credit file will be updated by your creditors to show that the debt has been satisfied and after 6 years from the commencement of the IVA all references to the IVA will be removed from your credit file enabling you to apply for credit again.

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Considerations for homeowners

An IVA proposal ideally has to show your creditors that the amount that they will get back from the IVA is more than if you became bankrupt.

If you are a homeowner and became bankrupt then you would have to buy back the value of your share of the equity in the property, failing which the property could be repossessed.

For this reason it is vital that the IVA proposal takes into consideration your equity in the property but there is now an agreed set of rules that: –

  • Guarantees that you will never be forced to sell the property.
  • Protects the property from legal action by your unsecured creditors.
  • Requires you to try to release equity from your share of the property by re-mortgaging in the final year of the IVA but with some very important safeguards for you.
 

The safeguards that are there to protect you are:

  • You do not have to take a re-mortgage that exceeds more than 85% of your share of the property value, even if one is offered to you.
  • Any additional cost of the new mortgage must not exceed half of your monthly payment in to the IVA.
  • You are not required to extend the mortgage term beyond the existing mortgage term.
  • If you can show that you have been unsuccessful in re-mortgaging then it is agreed that you will extend your IVA for a further 12 months in place of having to re-mortgage.

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Considerations for the self employed

IVA’s were originally introduced to help the self-employed business person avoid bankruptcy and continue trading and so they are an ideal debt solution for the self-employed.

Because of the varied nature of businesses, however, care has to be taken in the manner in which the IVA is set up and so it is essential to take the early advice of an insolvency practitioner who is the only type of adviser who is likely to have the knowledge and experience to be able to properly advise you.

The production of realistic trading forecasts on which your self-employed earnings can be based is therefore very important and the general basis of the income to be used in the proposal but we can work with you on this.

  • There are special rules for the manner in which self-assessed tax is treated in IVA’s although any debts owed to HMRC can be dealt with in an IVA. The effect of tax has to be understood and planned for within the IVA.
  • If business debts are to be included in the IVA what effect will there be on the trading business?
  • What effect will there be on the business to a likely restriction on available trade credit?
  • If the business trades from leased premises what effect would an IVA have on your relationship with the landlord?
  • Are there any contractual issues that need to be considered?
  • Are there any specific industry issues that need to be considered?

We will discuss and work with you on all of the above to ensure that you choose the best solution to fit your individual needs as we recognise that every case is different.