Setting up an IVA

Here are some of the questions we have been asked most frequently about setting up an IVA.

Find out how long the IVA application process takes, which debts can be included and what to do if your IVA proposal is not approved by your creditors.

If your IVA question isn't listed below, you can ask the ClearDebt Community and a member of the team will provide an answer for you.

• What information do I need to arrange an IVA?
• How long does it take to arrange an IVA?
• How much debt do I need to qualify for an IVA?
• How long does it normally take for an IVA application to take place, from initial call to proposal accepted?
• Once submitted to my creditors, is my IVA proposal guaranteed to be accepted?
• Can I cancel the IVA once it is set up?
• What happens if the IVA is not approved?
• Which debts can be included in an IVA?
• Do I have to meet the insolvency practitioner?
• Can I arrange an IVA directly with my creditors?
• Can anyone with debts apply for an IVA?
• Once I decide upon an iva, is interest and other charges frozen at that point?
• How long must there be between IVA proposals?
• When is the best time to do an IVA?
• Does the insolvency practitioner (i.e. ourselves) represent the creditor or the debtor?

 

The questions can be categorised by the following:

Facts you need to know about how an IVA works

Benefits that will help ease the current pressures you may be feeling whilst trying to pay back your debt

Be aware of important issues which may affect your relationship with creditors, pending court action, your credit rating and lifestyle.

 

WHAT INFORMATION DO I NEED TO ARRANGE AN IVA?

To arrange an IVA, your proposal for an Individual Voluntary Arrangement (IVA) must be a full and true account of your current financial situation.

You will need to provide:

• The name and contact details for all companies, organisations and individuals that you owe money to and the amount that is owed.
• Details of your monthly income and spending (ClearDebt wants to make sure we put forward an arrangement you can genuinely afford).
• Information about your house, including its value and any mortgage. You must state who your mortgage provider is and the amount of your mortgage (unlike bankruptcy, you will not be forced to sell your house in an IVA).
• Information about any loans that are secured on your home.
• Details of any assets of significant value, which may be of interest to your creditors. (Unlike bankruptcy, it's up to you what you decide to keep or to sell to meet your debts; but your creditors may be more inclined to support your IVA arrangement if you sell the Roller and buy a Ford instead.

Don't worry if you don't have all this information easily to hand, our advisors will help you get it together - and, with your permission, we can approach creditors on your behalf.

 

HOW LONG DOES IT TAKE TO ARRANGE AN IVA?

No one IVA is the same and the time they can take varies. However, the quicker that we receive information from you each time it is requested, the more quickly we will be able to move. We want you to get the certainty of an IVA as soon as you can.

ClearDebt is proud of the speed with which we work: We regularly put IVAs in place in around four weeks, but six weeks would be more typical.

A rough guide to time involved to arrange an IVA

• The ClearDebt Contact form: around 2 minutes
• Detailed Financial Healthcheck: between 15 mins to 1 hour
• (Use the checklists at the beginning to gather together information you will need before starting to answer the questions).
• Advice call - a detailed personal review of your situation with one of our qualified debt advisers - 30 - 40 mins.
• You will receive your Personalised ClearDebt Report within 2 working days of completing the ClearDebt Financial Healthcheck and having talked things over with one of our advisers.

Our report will ask you to send back confirmation of the details you have provided together with credit card statements, payslips etc detailing this. You will also be asked to complete a small number of simple additional questions - We will move your case forward as soon as we receive this back from you.

Once ClearDebt has all the information we will arrange for you to have a telephone discussion with your Insolvency Practitioner (or suitably qualified representative) - so you understand fully your rights and responsibilities; how the IVA will work and how the IVA will affect you. Before you actually meet ClearDebt you will be sent a copy of the draft IVA proposal for you to review and comment on.

Once you are happy with your IVA proposal and after you signed and returned the IVA proposal, the documentation will be sent by ClearDebt to the creditors and the court (this is merely a formality unless an interim order is required.).

There will be a minimum of 14 days and a maximum of 28 days between the documentation being circulated and a meeting of creditors being held. It is at this meeting that the creditors decide whether or not they agree to your IVA proposal. The arrangement is passed if 75% of your creditors (measured by the value of their debt) who vote agree.

 

HOW MUCH DEBT DO I NEED TO QUALIFY FOR AN IVA?

You need a minimum debt level of £5,000 and two creditors (most other IVA providers insist that you must owe at least £15,000) to be considered for an IVA. There are other criteria you will also need to meet. To get a better idea of this and to find out if it fits your circumstance, please see our guide here.

 

ONCE SUBMITTED TO MY CREDITORS, IS MY IVA PROPOSAL GUARANTEED TO BE ACCEPTED.

Unfortunately not. Your creditors will determine whether or not they are happy with the proposal and the suggested amount you feel you can contribute on a monthly basis.

One creditor can stop the IVA if they are owed more than 25% of your total debts. If more that 75% of your creditors by value, approve the IVA, then any dissenting creditors are bound by the arrangement.

 

CAN I CANCEL THE IVA ONCE IT IS SET UP?

An IVA can be cancelled or terminated if you fail to honour your obligations therein and failing to rectify any breach. Once your Supervisor confirms you are in breach and has given you a period of time to rectify such breach AND you have failed to rectify, your Supervisor will terminate your arrangement and notify you and your creditors that your arrangement has been terminated.

 

WHAT HAPPENS IF THE IVA IS NOT APPROVED?

If your IVA proposal is not approved, we will always look at possible changes to its structure and contribution suggestions. If, after doing this, there is no room for manoeuvre, a member of our team will speak with you and see if there is an alternative solution such as a Debt Management Plan, which may at least suit you for the short term if not longer. Many clients who are not applicable for an IVA opt for this solution until their situation changes than an IVA may be reconsidered.

Should neither solution be suitable for you (An IVA or Debt Management Solution), we will discuss alternative options, which may include declaring yourself bankrupt or looking into the feasibility of a Debt Relief Order.

 

WHICH DEBTS CAN BE INCLUDED IN AN IVA?

Normally, all unsecured debts can be included within an IVA. This includes overdrafts with your current bank and credit card balances.

In short, any service that you are no longer using, for which money is outstanding, has the potential for inclusion in an IVA proposal. For example, an outstanding bill for a disconnected mobile phone.

Personal debts for unpaid Income Tax and VAT can also be included.

 

DO I HAVE TO MEET THE INSOLVENCY PRACTITIONER?

You don't have to, but we understand entering into an IVA is a big step and that many of our clients want to meet the people who are dealing with their affairs. We will always offer the opportunity for you to meet one of our representatives should you wish to but this isn't essential to creating and managing the IVA. We can as an alternative, arrange for you to meet a specialist in the area you live or simply have a telephone call with one of our IP's or a member of his/her staff.

 

CAN I ARRANGE AN IVA DIRECTLY WITH MY CREDITORS?

No. The arrangement takes the form of a contract that is legally binding. One of the key components of this is that your proposal of repayment is handled by a Nominee and the ongoing maintenance of the payment schedule is the responsibility of a Supervisor (both offices must be held by a licensed Insolvency Practitioner). In most cases the same Insolvency Practitioner will fulfil both of these roles.

 

CAN ANYONE WITH DEBTS APPLY FOR AN IVA?

No, you must be technically insolvent. There are two basic tests of insolvency:

• Your liabilities (debts) are greater than your assets
• You are unable to pay your debts as they fall due for payment

If both these conditions apply to you, then seek professional advice as an IVA may save you from Bankruptcy.

If only the second point applies, then an informal debt management plan or a home equity release could be the most appropriate course of action to reduce your current debt repayment levels.

 

ONCE I DECIDE UPON AN IVA, IS INTEREST AND OTHER CHARGES FROZEN AT THAT POINT?

No. There is no agreement in place with the creditors until the IVA proposal has been formally approved. Charges are only frozen once the IVA is officially in place. Until that point, creditors have every right to add charges and allow interest to accrue as the IVA proposal may not be accepted.

 

HOW LONG MUST THERE BE BETWEEN IVA PROPOSALS?

This often depends on the reason the IVA was rejected or terminated. If it was rejected due to "red tape" issues such as timings, we may be able to make a new application for you straight away. However, if the rejection is more to do with the short time you have had your debt, creditors may stipulate that you must wait until the debt is 12 months old before re applying. Furthermore, if it emerged that the IVA failed due to your dishonestly, this may prejudice future IVA attempts either at creditor meetings or by getting an IVA company to represent you again

 

WHEN IS THE BEST TIME TO DO AN IVA?

The simple answer here is as soon as possible, for a number of reasons.

Firstly, if you are able to put together proposals for the settlement of your current debts before they get any larger, you will be able to maximise the amount that can be repaid to creditors.

Secondly, creditors are most likely to take a commercial view when deciding whether or not to agree to the IVA proposals. If they are likely to receive a higher dividend than they would in the event of your bankruptcy, an IVA will be a more attractive option.

Finally, creditors also want to see that you are taking every opportunity to tackle your debt problems. You are certainly not alone in experiencing significant financial problems, however a positive approach to remedying the situation for the benefit of the creditors will be appreciated much more than signs that you have strung them along as long as possible and this is now your only option.

 

DOES THE INSOLVENCY PRACTITIONER (I.E. OURSELVES) REPRESENT THE CREDITOR OR THE DEBTOR?

The role of the Insolvency Practitioner changes through the processes and at each stage of advice. The initial advice to you is where he/she acts for you. When he/she helps you in drafting the Proposal he/she starts acting as your Nominee and he/she has to ensure that your interest and those of your creditors are treated equally. Once approved and when acting as your Supervisor he/she acts in the interests of Creditors to ensure that you keep to your obligations.

 

Ask the ClearDebt Community.