How do I apply for an IVA?
If you wish to choose the alternative of IVA to redeem yourself from the financial problems you are facing, you need to know how to apply for an IVA. It can free you from the burden of debt in about five years.
Usually with the aide of a debt advisor, a debtor sends the proposal for application of an IVA depending on his current financial condition to a Licensed Insolvency Practitioner. Then a formal proposal is drafted by the IP taken into consideration the history of debt and explaining the current plight as well as the willingness to reach an agreement. This is then signed by the debtor and sent to the creditors who reply within a span of two weeks. The creditors may ask for amendments in the proposal which will be intimated to the debtor by the IP. Thereafter, a meeting is held between the creditors who either favor or reject the proposal. If a 75% vote count is in favor, the proposal is implemented. The court and the creditors are the only two parties to whom the proposal is disclosed.
It takes about 4-6 weeks to apply and finally settle an IVA program. During this period other formal considerations like filing facts, drafting proposals, collection of evidence and sending proposals to the creditors are done. Thus through a monthly payment, debtors can relieve themselves off their debts. This monthly payment is administered by the IP and presides over the meeting, if any, between the debtor and the creditor. Otherwise, during the five years the two parties are not permitted to see each other. All transactions are to be done through the IP only. If the debtor respects the monthly payments to be made he can relieve himself off in five years and the remaining payment is written off.
An IVA is a serious financial agreement, so be sure to check the credentials of your IP before getting involved!
Some simple ways to beat Debt
The simplest way to beat debt is to listen to your nana and not get into debt in the first place. Remember when people used to save up to get the things they wanted? Yes, the good old days when we couldn’t whip out a credit card and charge some new purchase which we would probably rarely use in any event. But since most of us are already in debt we first need to get out of it before we can start thinking of saving.
The first thing you have to establish is exactly how much you owe. No matter how much you hate those bills you have to sit down, go through them and find out exactly how much more you have left before you finish paying off your debt. The best option would be creating an excel sheet where you add the outstanding balance, the interest rate and your monthly payment.
Once you have added all your debts now you need to decide which one to focus on to pay off first. Many advocate paying off the highest interest one off first while others feel that you should start with the smallest to highest. In either case you are going to use a system known as the debt snowball which means that once you have paid off one debt, the money going to that payment each month will be added to the next debt so you can pay that off quicker and so on and so forth.
To pay off that first debt faster you are going to have to make some changes which means drawing up a budget to see where all your money is going and if you can save anywhere. Depending on how quickly you want to pay off your debt you can cut out most things except for the essentials. No, chips and a pint every night are not essentials, we guarantee you will live without them for a while.
Every penny you save will go towards making extra payments on your first debt so you can pay it off as soon as possible. Once you have finished with the first one you will take the money you were paying on it every month and add it to the payments of the second debt until that one is finished and then move on to the next. This may seem a daunting task but you will find that paying off your debts and being well on your way to a stress free life can be quite an addicting feeling.
5 Money Saving Tips to Avoid Debt
Whether you are already in debt or are trying to avoid getting on the hamster wheel there are some tips that can help you save money. The first thing you really need to do to help you reduce your spending is to determine whether or not you are out of control. Some clear signals are that you have so much stuff that you don’t know what to do with it and you still have jeans you haven’t worn since you bought because you just have too many clothes.
1. Before you buy that new gadget, shirt or new book step back and ask yourself if you really need it. Preferably give yourself 24 hours to think about it and if you still find you really want the item and it will be useful then make the purchase. But more often than not you will find that it was a thing of the moment spurred by great marketing campaigns and once you get home it will slip your mind completely.
2. Saving on food shopping does not have to mean eating stale bread with a side of water for the rest of your life but it does mean cutting down on all the food you buy, half of which you throw out anyway. Herein lies the problem, we buy so much food as if its going out of style and then we end up throwing it away because it has a funny smell. If you work out how much money you can save in a year by just not buying and throwing out so much food you may be shocked.
3. Make your own coffee at home. It really isn’t that hard and you are guaranteed that your cup of java is not going to cost you the equivalent of a small car in a year, unlike picking up your coffee from the local Starbucks every morning before you dash off to work. You can also try taking your lunch from home rather than ordering takeout or going to the pub and buy a second car instead.
4. Switch lights off in rooms after you are finished, turn off electrical equipment you aren’t using and don’t leave the water running for the sake of it. These small changes will cut your electric and water bills down significantly. Why should you pay for something that you aren’t even using?
5. Socializing is great and we all need to do it every now and again but that doesn’t mean eating out every night followed by drinks and, if you are in a generous mood, picking up the tab. You are just flushing money down the toilet and you will end up with a huge debt looming over your head and you won’t have anything to show for it. No one says you shouldn’t see your friends but have you ever considered cooking dinner and inviting them over to your place? It is not as difficult as it may sound and you will probably have more fun as well.
A few changes in your life can have you saving thousands every year which will help you pay off your debt or avoid it all together.
What is an Individual Voluntary Arrangement?
An Individual Voluntary is a formal agreement you enter into with your creditors whereby you agree upon a lower monthly payment and, usually, within 5 years your debt is considered settled, regardless of how much you have paid off. Due to its formal nature it must be drawn up by a licensed professional therefore be prepared to pay an upfront fee for the privilege. Your financial situation will be evaluated and a repayment plan will be drawn up which you will have to sign.
Once the forms are all signed an Interim Order will be issued by the court to freeze and impede any legal action from being taken against you by your creditors. A meeting will be organized with all your creditors which you will have to attend where your creditors vote whether or not to accept the IVA. Unlike a debt management plan, an IVA is a legally binding agreement and if the creditors who represent 75% of your debt vote for the IVA then the remaining 25% have to accept it as well as it is law.
Advantages of an IVA
The main advantage of an IVA is that you will be debt free within 5 years and up to 75% of your debt can be written off. Your home and other assets will also be protected and you will also suffer from no professional disqualification, unlike filing for bankruptcy. Of course, you will also be making much lower monthly payments but note that your wage slips are monitored and if you earn more then you will pay more.
Disadvantages
As with anything there is also a flip side. The main problem with an IVA is that you must have a minimum of 15,000 in debt to at least 3 creditors and you will also have to make a minimum payment of 200 per month. If you fail to make your payments stipulated in the IVA then you will automatically be made bankrupt and your IVA will show up on your credit report for 6 years. It is also important to remember that lying on you IVA application is a criminal offence.
IVA or Debt Management?
Deciding between an IVA or debt management plan can be a daunting task and there is no right or wrong answer. However, both can be a good option in different situations therefore knowing the pros and cons of each will help you make a more informed decision.
The first criteria which will make your choice extremely easy is that you can apply for an Individual Voluntary Agreement only if you have a minimum of £15,000 in debt to at least 3 creditors while a Debt Management Plan limits you to a minimum £8,000 in debt to 2 creditors.
One of the most important differences between the two, especially if you qualify for both, is that with an IVA you will be debt free in five years, regardless of how much you have paid off, whereas with a debt management plan you can end up paying it off for the rest of your life if the monthly repayments are small. Also, the fact that an IVA is a legally binding agreement means that your creditors cannot back out of it any time they feel like it, while a debt management plan carries little judicial weight. However, this legal character of an IVA means that if you cannot keep up with payments then you will most likely end up being made bankrupt. There is a very fine line between the good and the bad in this case.
On the other hand with an IVA you will be making monthly payments that can vary according to your earnings, in other words the more you earn the more you will be paying, whereas with a debt management plan you pay only the amount you want and feel can afford which is then fixed for the duration. One big problem with a debt management plan is that most of the companies who help you organise it require that you have an income and own your home which will be used as surety against your debts, while an IVA will protect large assets such as your residence.
Depending on your situation both plans can be a good choice. However, if you are in deep debt then maybe an IVA is your best option so that you can see the light at the end of the five year tunnel.
How to Find an IVA Company
Individual Voluntary Agreements are administered by Insolvency Practitioners and as with any service provider some are better than others. Often, people choose to speak to an IVA arrangement company which will asses your situation and recommend the best I.P. For your situation which raises another problem. How to find a good IVA arrangement company?
As with any service provider your best option is to speak with family and friends to see if anyone is in a similar situation to yours and can recommend the IVA company they worked with. Even if you are uncomfortable revealing your situation to your family remember that the loss of pride is not going to hurt you as much as losing a lot of money because you made the wrong choice.
Another option open to you is to use the Internet and attempt to find honest reviews of the various IVA companies on the market. However, there are some tips that can help you judge if the IVA company is a good fit for you or not.
- Nothing in life is certain except death and taxes so be leery of a company that guarantees you your IVA will go through and without a hitch. The only IVA that is absolutely certain is the one that has already been signed by all the involved parties.
- Avoid companies who charge for doing your paperwork. There are companies who will do this for you for free and a company that charges makes one wonder about their success rate if they have to charge to do your paperwork.
- If your IVA company doesn’t seem to be looking to thoroughly at your particular situation and hasn’t given you many options then maybe you should get a second opinion from a company who is focused on you and not applying a cookie cutter solution that is not applicable to you.
These are just a few ideas to help you on your way to finding an IVA arrangement company that will handle your case with the highest degree of professionalism. After all, you are paying for their services so you deserve the best. Don’t feel guilty or embarrassed about your situation and allow yourself to be badgered into something that feels uncomfortable because, remember that without you these companies would be out of business.
How to Get Help with Debt
If you are sinking further and further into debt and can’t seem to find a way out or your income is just too small to cover your monthly payments then you need some help with your debt. Luckily, there are many resources available so you can get help with your debt and many of them are free.
Advice over the Phone
The National Debtline offers advice which is free and confidential over the phone as well as multiple publications on their website. Note that they have different services for England, Scotland and Wales because the laws regarding debt vary. You can visit their website at nationaldebtline.co.uk.
The Consumer Counselling Service (CCCS) provides free and independent advice to help people get out of debt. They have a telephone and an on line service, as well as providing a wide range of tools and courses.
Payplan also offers free advice to debtors but they also help with money management advice and tools. They also provide free debt management plans and IVAs with no upfront fees.
Debt Advice in Person
If you are looking for a more hands approach and would like to meed with your counsellor then the Citizens Advice Bureau is your best option. The provide information and advice on a whole host of issues from legal to financial and many more. There are CAB offices all over the country and you can find them with an on line search or in the local phone book.
AdviceUK is made up of a network of independent advice centres which can help with debt advice. Another option is Shelter which will also provide guidance in obtaining welfare benefits, sorting out any care and health requirements besides debt advice.
There are many more free services to help you get your debt problem under control and these are just a few of the larger networks available. If you really want to get out of debt and don’t know how then pick up that phone to get the ball rolling.
What is an IVA?
One of the first topics we should cover is exactly what an IVA is, as a lot of confusion surrounds finance related terms.This article is aimed to describe exactly what an IVA is and how it can be used to help reduce your debt.
An IVA can be a viable way to get yourself out of debt.
IVA actually stands for individual voluntary arrangement, which is a formal agreement between you and your creditors to pay back money that is owed to them, when you are currently unable to adhere to the existing payment terms. Generally an IVA can last around 5 years, with lower monthly payments usually offerd to ensure the repayments are met on time. Because of the formal nature of an IVA, the agreement must be set up by a certified insolvency practioner.
How does the IVA (individual voluntary arrangement) process work?
When an IVA is arranged, you will be asked about your current outstanding debt and other questions relating to your lifestyle, including your employment status, salary and other factors which may help formulate a payment plan to suit you. The idea here is for your IP (insolvency practitioner) to calculate the best possible payment plan to suit your current lifestyle, so that you can comfortable keep on paying your debt repayments.
The IP will then make an application to the court for an interim order, which will prevent any creditors taking legal action out on you in relation to the outstanding debt owed to them. A meeting will usually then be arranged, to discuss the terms of your IVA.If everything goes well, you will be given a reduced payment plan to ensure that your creditors get some of their money back, rather than costly court proceeding to reclaim the whole amount! NB: It is important to not confuse the IVA with a debt management plan, which is not legally binding!
Although an IVA is a very serious procedure (please note: that the process will be noted on your credit rating for up to 6 years!!), it can be a way to help you restructure how you pay your debt.
This website will continue to tell you more about debt managament, IVA’s and other debt relating issues. Please check back regularly for more finance articles!
Welcome to IVA Tips.co.uk!
Hi all,
And welcome to IVA tips.co.uk, a free resource to help you with your debt management and financial worries. On this blog you will find tips, advice and articles relating to debt management, IVA and money saving. Our ultimate goal is to support and help those in financial trouble out of debt. Many thanks for dropping by!
The IVATips Team.