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!
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.
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!