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An IVA is not the same as a Debt Management Programme, which is less informal. An IVA is arranged to help you pay off your debts in a way that is affordable to you. An IVA states the amount to be paid monthly and usually lasts for a period of 60 months.
An IVA is based around one monthly payment over a period of 60 months. You will be closely involved in calculating the monthly repayment, as you will be asked to make known all of your assets, liabilities, income and your cost of living. This information will ensure that you will not get into even more debt, as the amount payable to creditors is determined by the amount you can afford to pay after your normal cost of living has been deducted.
An IVA proposal has to be prepared by a licensed Insolvency Practitioner (IP). As the debtor you will be sent a copy of the proposed agreement for you to approve. Should you disagree at this point with anything in the proposal you should negotiate any alterations. The IP will then present it to the creditors. Once the proposal is approved the debtor will take it to their local county court to have it registered. A copy of the proposal is sent to each creditor giving notice of any creditors meeting that may be required.
Creditors vote to accept or reject the proposal, they may wish to add their own modifications but can only do so with the debtors consent. In the case of a consumer IVA creditors usually prefer to vote by fax or post rather than attend any meeting. The debtor will usually be asked to make sure they can be contacted by phone on the day of voting.
The rules of an IVA state that, providing 75% (in value terms) of those that have voted, vote to accept the proposals (with or without modifications) then the IVA becomes legally binding on all other parties whether they voted or not. When an IVA is accepted the IP monitors the IVA's progress and ensures that the terms and conditions that were agreed to are properly adhered to. It is the debtors responsibility to pay the agreed payments to the IP who will then ensure that these payments are distributed to all creditors on a pro-rata basis. It is in the debtors own interest to maintain their payments as failure to pay will almost certainly result in the failure of the IVA. If a debtor finds at any stage they have difficulty paying they should contact their IP who may be able to re-negotiate with creditors.
Once the IVA has been completed in some cases the debtor may not have actually paid off all of their debts, but the outstanding balances are written off. The debtor is considered free and can make a fresh financial start.
If you have an endowment policy linked to your mortgage, then you may have to cash it in to use the proceeds to pay your creditors. The same is likely with any equity you may have in your home, the fact that you have entered into an IVA with creditors means that such drastic measures may be expected of you by your creditors to pay your debts. |
