An IVA is a legally binding agreement between you (“the debtor”) and your creditors, which enables you to restructure your affairs, while retaining an element of control and helps to relieve you from the constant stress and pressure that you face when dealing with debt.
Every year roughly 40,000 people enter into an IVA as a way to resolve their financial problems.
In order to propose an IVA, you will firstly need to engage with a licensed insolvency practitioner, who will assist you in preparing the statutory documentation required to propose an IVA to your creditors. When proposing an IVA, your creditors will expect that the return to them on their debt is greater than it would be in the event that you were made bankrupt.
Our experience of working with both debtors and creditors enables us to formulate a strategy that will not only be appealing to your creditors, but will also be structured in a way that is mindful of the changing circumstances and impact on both you and your family.
As part of the initial work undertaken, we will prepare a comparative outcome statement to illustrate the differing outcomes for creditors. There is a duty on the insolvency practitioner, in their initial capacity as nominee, to ensure that the proposal is reasonable, realistic and achievable. If we feel that an IVA is the right procedure for both you and your creditors, we will then notify creditors of the proposal and inform them of how the terms are to be structured relative to your circumstances.
Ordinarily, there are two types of IVA: a consumer-based IVA, or a complex IVA.
In a consumer-based IVA, your debts are primarily made up of bank loans, credit cards and utility bills, and your only asset is the surplus income arising from your household after discharging your reasonable monthly outgoings.
The IVA will propose that your debts are frozen, along with any further interest and charges, and you will make a monthly contribution from your surplus income, for a period of up to 60 months, to the insolvency practitioner. It is likely that the amount you contribute over the 60 months will pay only a proportion of your total debts; however, provided your proposal is accepted and you comply with its terms, you will be discharged from those debts in full and final settlement, with your creditors writing off any balance due to them, allowing you to get on with life.
Where your affairs are slightly more complicated, such as being a homeowner, or where you trade in your personal name, you will be deemed to be a complex IVA, and the expectation may be that not only do you have to make contributions from your monthly surplus income, as you would in a consumer-based IVA, but you also have to realise some or all of your personal assets or introduce amounts equivalent to their value for the benefit of your creditors. Therefore, if you are self-employed and your business is viable, you can continue to trade in an IVA, provided that there are no restrictions placed upon you by your governing or licensing bodies.
It is possible to enter into an IVA even if you are already bankrupt or have been presented with a bankruptcy petition; however, you will note that an IVA is a long-term commitment, and in the event that you default on the terms of the IVA proposal, you may end up being subject to bankruptcy proceedings and their consequences at a later date.
In the event that an IVA appears to be a suitable option for you, please contact one of our personal insolvency experts to arrange a free, no-obligation appointment.
Dean Nelson, Nicholas Lee, Andrew Stevens and Michael Roome are all licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the insolvency code of ethics, which can be found here.
When acting as receivers, administrative receivers or administrators, they act as agents only, without personal liability, and when acting as administrators, the affairs, business and property of the company are being managed by them.