Fresh Finance - What Is An Iva

Debts over £5,000?


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What is an IVA?

Make reduced payments over 5 or 6 years.
Some debts could be written off.

If you have over £5,000 of debt, have two or more different creditors and can afford a minimum of £80 each month towards your debts then you may qualify for an IVA. There are other factors that must be assessed such as your property status and your current income to see if you qualify for an IVA. Find out more below or See if you Qualify for an IVA.

An IVA (short for “Individual Voluntary Arrangement”) is a legal process which enables a person to avoid bankruptcy by making an agreement with their creditors to pay their debts over a given period (usually 5 or 6 years) and in most cases a percentage can be written off. The process is started by making a proposal to creditors, with the help of an Insolvency Practitioner.

The amount you have to repay monthly is calculated through an analysis of your income and expenditure. Once agreed, the repayments are legally bound by a contract and if you do not meet your side of the deal, the IVA can be terminated, putting you back to square 1.

For an IVA to be accepted, of the creditors who vote, at least 75% (in value) will have to accept the proposal. Once accepted all your creditors will have to accept the IVA proposal even if some of them may have originally objected to the IVA.

If you are a homeowner, normally you will be required to release equity which you have in your property by taking out a remortgage or a secured loan in the final year. This money will then have to be paid to your creditors. Once an IVA has been agreed by your creditors, all interest and charges on your unsecured debt will be frozen. Your financial situation will be reviewed annually by your IVA supervisor and if there is a change in your financial circumstances, for instance a salary increase, then an increase in your contribution towards your IVA may be required. Also, if you circumstances have worsensed, it is possible in most cases to negotiate revised terms

An IVA is more than likely to affect your credit rating. If you are currently struggling with your repayments then your credit rating is already likely to be poor. If you are concerned with how an IVA affects your credit rating, or anything else, then please contact us.

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What you need to know

Your responsibilities with an IVA

If you fail to keep up your repayments on an IVA then your arrangement may fail, in which case you will be back at square 1. In some cases this could result in Bankruptcy.

Homeowners may be required to release some equity (where applicable) to help pay off some or all your Debts. If your home does have to be remortgaged to release equity, your ability to obtain a mortgage may be restricted and will likely result in you paying a higher interest rate. If you are unable to obtain a remortgage then your IVA can be extended for up to 12 months.

Only unsecured Debts included in an IVA may be written off by your creditors at the end of the period. Any secured Debts will still have to be paid off in full.

You will have to adhere to restrictions on your expenditure during an IVA and you will also be required to provide proof of income and photo id.

Am I eligible?

  • You have unsecured debts greater than £5,000
  • You have 2 or more creditors
  • You can afford to pay at least £80 per month

Fees with an IVA

There are no upfront fees and the following fees will only be charged if your IVA is approved:

  • • The Nominee’s fee - The Nominee's fee proposed to creditors will be £1,900
  • • The Supervisor’s fee - The Supervisor’s fee is a monthly fee which covers the specialist work carried out to administer your IVA for the duration of the IVA period (typically a 5 year period). This fee will be £1,750. In addition to this, your Supervisor will charge a fee of 15% of Additional Realisations that are not monthly contributions.

Both fees will be incorporated into your monthly payment. All fees will be explained to you before you enter any agreement.

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