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 over a 60 month term. Once the 60 month term has been completed, you will be debt free as any outstanding debt will be written off. IVA’s were introduced by the Government in 1986 as part of the Insolvency Act 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:
- £15,000 or more of unsecured debt
- more than 3 creditors
- have a surplus income of at least £200 per month (after paying all household bills including any secured loans)
- are wanting to avoid bankruptcy at all costs

an IVA could be the solution you need.

3. Why do I need debts over £15,000 and contributions of £200 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, however, Harrington Brooks will not charge you for this as our service is brought to you free of charge. All of your creditors will pay Harrington Brooks from your monthly repayments, which means that the final return (dividend) to your creditors is less than what you pay towards your IVA.

Creditors will apply two basic rules when deciding whether or not to proceed with an IVA:

- If your debts are less than £15,000 and the cost of the IVA as a proportion of the outstanding debt is too high to be economically viable
- If the monthly payment is under £200 and the cost of running the IVA would absorb too much of the money coming in to make it economically viable.

4. How will my IVA work?
Harrington Brooks will do all the work for you giving you all the reassurance you need. We will negotiate with all of your creditors through a series of telephone meetings 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 document.

5. Will I loose 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.

6. Will my IVA include all my debts?
An IVA is a payment plan with allows you to make reduced payments to all creditors with which 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 financial advisor whose specialism is in insolvency. Most Insolvency Practitioners were previously Chartered Accountants or Lawyers and after a number of years studying and after passing some intense exams, qualify to apply insolvency legislation and act as Administrators and Liquidators of companies. They are very different from other ‘financial advisors’ such as mortgage advisors as Insolvency Law is a complex and intricate area of law.

9. How long will my IVA last?
In usual 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. They can apply to a county court for an ‘Interim Order’ which means that your creditors can’t continue or start new debt recovery proceedings against you. This order will remain in place until your IVA proposal is agreed with all of 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. Harrington Brooks will be acting as your legal representation therefore if they have any queries or issues these will come via us.

11. Will people find out about my IVA?
An IVA is a private legal agreement between an individual and their creditors. It is completely confidential and no one will know about it.

12. Can I still keep my business?
Yes is the simple answer, however, this is a complex area. Self employed people can qualify for IVAs, likewise small companies can qualify for CVA’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 wish to keep your bank account but you will probably not want to. A simple solution is to open another account with a bank that you do not owe money to. This is the account that the IVA will be managed.

14. Can I apply for an IVA if I have been made Bankrupt or I have a CCJ?
Once you apply for an IVA your Insolvency Practitioner will contact the appropriate authorities and courts. Your Insolvency Practitioner will discuss and negotiate with all of your creditors and convince them that its in everyones best interests to proceed with an IVA. If this is accepted, your bankruptcy will be annulled once your IVA has been approved.

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 adapted in such circumstances. Also, if the issue is a short term one, emergency payment breaks can be granted. If you do miss any payments without the Insolvency Practitioners 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 effect your credit rating, however, your rating is more than likely to be effected 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 secured or unsecured.

An IVA will assist with getting your credit rating to acceptable levels quicker. 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 therefore you your credit rating should be better.

17. How much will an IVA cost me?
Harrington Brooks do not charge any fees. Fees charged for the implementation and monitoring of you IVA are paid by your creditors with funds taken from the monthly repayments.

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 and that they agree to freeze all interest and charges in order to write off a large proportion of your debt.

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. From taking 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.

20. So how much debt is written off?
Each case is unique and what your creditors accept depends on your personal financial circumstances. The normal level of debt written off is approximately 60%.

In real terms the debt written off by your creditors is larger. In the example
above you have paid £15,000 into your IVA. If our costs, paid by your creditors, were £4,000 over 5 years, the net return to your creditors is only £11,000. Therefore £19,000 is effectively written off (63%).

21. Is an IVA service regulated by anyone?
Insolvency practitioners are recognised in law as experts and 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 of England and Wales (ICAEW)
- Institute of Chartered Accountants Scotland (ICAS)
- Department of Trade and Industry (DTI)
- 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 account. Which is only fair as your creditors had agreed 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 validated, the proposal needs to be accepted by 75% of the creditors (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.

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 was to be rejected you will not owe us anything.

25. Can I cancel my IVA?
An IVA is a legally binding agreement between yourself and your creditors. Once it has been set up and agreed it cannot be cancelled.

26. Will I still receive letters from my creditors?
You may receive some correspondence from Creditors while the IVA is being processed, however, once it has been agreed and accepted you won’t here from them.

27. What is the minimum number of creditors required?
For an IVA you will have 3 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 Advisor 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, therefore all outstanding debts will be cleared.