IVA or Individual Voluntary Agreement is a legally binding agreement between yourself and the creditors that you owe money to. It is the bankruptcy alternative and will allow an individual to be debt-free in 5 years.

You will agree on an amount you can afford each month over five years. At the end of the five years, they will clear your unsecured loan.

Being in debt can be stressful, and understanding the best debt solution is equally strenuous. Therefore, you must have a guide to explain your best options.

Understanding IVA

IVA might be what you need to consolidate all your debts into one payment that you can afford monthly over five years. The IVA procedure will allow you 60 months to organize how to pay your debtors.

Over these 60 months, you can pay a lump sum to settle your debt early as there is no set time in the 1986 Insolvency Act. It can last less than five years. Here is a guide to using the IVA to get rid of debt.

Comparing IVA Companies

Not all companies that claim to represent IVA are genuine. So it would help if you took the time to compare the companies before settling on one.

As you make the comparison, remember that IVAs are not for everybody. A good IVA company should tell if it\’s good for you.

Step 2; Make the Proposal

After speaking to a good debt consultant company, they will tell you if IVA is for you. If so, they will collate all your credit information into a proposal for a case referred to an Insolvency Practitioner.

The proposal will have all the information the IP will need. Then he will present it to your creditors in a professional manner.

The Paperwork for the Proposal

Before the IVA can draft the proposal, you must provide them with proof of your financials. Your IP will need to have the details of the circumstances that have led to your current financial difficulty.

Let your IP understand your income and expenditure so that they understand whether or not you will be able to maintain the payments that the creditors will be given for assessment. The details they will need include.

Total income
Total debt
Your expenses
Family situation (about partner)
Rent, mortgages,
Assets

The IP will need paperwork to confirm the current financial situation, rent or mortgage agreement, food, utility bills, and bank statements. Your wage or payslip will also be required to verify that you can afford the proposed IVA before it is proportioned to your creditors.

Statement of Affairs

The statement of affairs will also contain the creditor details and a breakdown of income expenditure. Your IP can gauge your disposable income from the analysis, which he will use to see what monthly instalment you can afford.

Then, an interim order stops your creditors from taking further action until the IVA has been considered and either approved or otherwise.

The Sip 3 Call

Your IP will now put in a Sip 3 call when the statement of affairs is appropriately organized. This step is a legally required IVA process that helps the drafter familiarize with the applicant\’s situation.

The SIP 3 call allows the drafter to get into the history of the applicants\’ financial problems to understand how they got where they are with debts.

Step 4; The MOC

The MOC, which stands for \’meeting of creditors,\’ comes after the selected insolvency practitioner has packaged the case. Your chosen IP will arrange a venue, time, and date where the creditors will meet. However, this only happens in theory, and the creditors communicate via emails or letters.

The Meeting of Creditors Vote

All the information collected, including disposable income, debt levels, and proof of debts, is forwarded to the creditors. A proxy voting is then set up, and they either accept or reject the IVA proposal.

Here, your IP will provide a figure you can afford to pay every month.
75% of the creditors must approve the IVA for it to go through. Most creditors only agree because it is their only way of getting some money back since the other option could be bankruptcy, where the creditor receives zero.

Refused IVA

Not all IVAs will be approved, and there are various reasons why one will be refused. A common reason for rejection of an IVA is if gambling is on the bank statements. The gambling aspect will lead the creditors not to trust you to keep up with the monthly payments.

Instead of total rejection, the creditors could also ask for modifications before approving.   However, if it’s a complete denial, you may have to look for other options. 

Approved IVA

If the IVA is approved, it becomes binding by law to both you and the creditors. At the meeting of creditors, albeit not physical, is where IVAs are rejected or approved. Once it’s approved, then you will pay the agreed amount for five years. Any debts owed after the 60 months are written off.

Step 5 Starting the IVA

At this stage, the creditors’ meeting Chairman will prepare the Chairman’s report and circulate it to the rest of the creditors and your mortgage provider, your bank, and the court. ( for North Ireland cases).

The report will spell out what you need to do to complete your voluntary agreement and your Insolvency Practitioner who acted on your behalf. At this point, all your creditors will stop chasing you. The one affordable monthly payment you make will be distributed among all the creditors.

Step 6 End of the IVA

Make sure you keep the terms of your Individual Voluntary Agreement. You will be debt-free in 5 years. If you have varied or adverse changes during the life of the IVA, your supervisor may offer your creditors some variation in the terms.

IVA Completed

When you complete paying off the IVA, you are free, and you can start rebuilding your credit file. You will not be under duress, and you can have a new beginning.

Parting Shot

An Individual Voluntary Agreement is a way out for you multiple debts when you become unable to pay them. The creditors have to take whatever you can pay as presented in the IVA by your IP. After five years, you will be completely free of debt as the balance will be written off as per the agreement.

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