In reality, if you have suffered for any prolonged period of time with debt, you are probably paying much more to your debts than you can reasonably afford.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is a legal agreement that enables individuals to make affordable monthly payments to their creditors over a fixed period.
It usually lasts for five or six years. After that time, any remaining debt included in your IVA is written off meaning you don’t have to pay it back.
During your IVA, if you co-operate with the agreement and maintain the agreed payments, creditors aren’t allowed to charge interest or fees on your debts. They also must stop debt colleting and legal activity to recover the debt.
An individual voluntary arrangement must be set up by a qualified insolvency practitioner.
What is an Individual Voluntary Arrangement?
An Individual Voluntary Arrangement (IVA) An IVA is a formal, voluntary agreement between an individual, their creditors, and a licensed insolvency practitioner (IP) that aims to repay part or all of the individual’s debts, potentially including some degree of debt forgiveness.
The arrangement is based on the individual’s financial situation, allowing them to make affordable monthly payments for a fixed period. The best way of calculating what you can reasonably afford is by going through your monthly income and expenditure. We will do this with you.
What are you left with after you have paid all your essential bills such as rent, council tax, tv licence, food, clothing, travel, telephone bills etc?
This is what is known as your disposable income, and this is the amount that is deemed to be what you can reasonably afford to repay.
For most people we have dealt with in the last year, what is left is not enough to cover the minimum repayments to debts. So, what tends to happen is people borrow off of credit cards, loans, friends, family or by extending overdrafts so that they can meet these debt commitments. What then happens is you get caught in a cycle of borrowing from one creditor to pay another. In these circumstances a debt solution is generally what is needed to solve the problem and stop the cycle. An IVA can assist.
An Individual Voluntary Arrangement (IVA) is a type of insolvency. It’s a voluntary, yet formal agreement involving you, your creditors, and an appointed Insolvency Practitioner, known as a IP, to repay a manageable portion of your debts. IVAs also include debt forgiveness, which means that, upon agreement, your creditors may forgive a portion of what you owe them.
Once established, it provides a lawful path toward regaining financial stability. An IVA is specifically tailored for individuals burdened by debt and struggling with their monthly repayments. If you qualify, it can enable you to eliminate unmanageable debt and typically
An IVA usually lasts five years, but it may last longer if you need to make up for missed or reduced payments. It may also be extended, usually to six years, if you’re a homeowner. As a homeowner, you may need to remortgage at the end of the fifth year of your IVA to cover some of your debts. If you’re unable to remortgage, you may need to carry on making your agreed IVA payments for up to another 12 months.
In some cases, creditors may agree to accept a lump sum to settle your debts. This is known as a full and final settlement individual voluntary arrangement. These IVAs don’t generally last for more than three months.
It’s essential to reflect on the following considerations when determining whether an IVA is the right solution for you.
What are the criteria to be able to apply?
There aren’t black and white rules about who can get an IVA. We’ll take into account lots of factors before deciding whether an IVA is suitable for you.
Typically, you will usually need:
- a regular and consistent source of income
- non-priority debts (credit cards, buy now pay later, personal loans, overdrafts etc.) of at least £5,000
- to live in England, Wales or Northern Ireland
- to owe money to more than one creditor
The amount of debt that will be written off is dependent on your individual financial circumstances and both the agreement of, and amount that can be written off in, an IVA are subject to creditor approval.
Benefits
- A formal agreement with lenders to make one affordable monthly payment towards all your unsecured debts.
- If your IVA is approved, lenders will freeze interest and charges and you are protected from further collection and legal activity to recover the debt, If you maintain payments into the agreement.
- On completion of your IVA, any remaining unsecured debt will be written off – up to 85%
- You’ll be left with enough money each month to cover all your essential living costs.
- You won’t be forced to sell your home. IVA’s typically protect things like houses and essential assets.
- Available in England, Wales and Northern Ireland.
Considerations
- We’ll need to check if an IVA is suitable for you. If not, we’ll suggest other ways to deal with your debt.
- An IVA will affect your credit rating.
- Fees will be payable if your IVA is accepted. Find out about the fees.
- Details of your IVA will be added to the Insolvency Register.
- You may need to reduce spending on non-essential items.
- If you own your home, you may need to remortgage to cover some of your debts. If you can’t remortgage, you may need to make your IVA payments for an extra 12 months.
IVA fees and costs
J3 debt solutions will only charge fees if an IVA is subsequently approved by your creditors and our fees are only taken from your monthly payments or asset realisations paid into your arrangement. We also offer, as part of your proposal, to start distributing a percentage of the payments made by you from as soon as month 3 of your arrangement or in some cases earlier, which means the balances owed to your creditors are starting to reduce. In some cases, creditors amend the terms of the IVA so that we are not required to make payments to them until the Nominees fees and disbursements have been repaid.
In an IVA there are typically three different types of cost charged by the Insolvency Practitioner.
Nominee’s Fee
These are fees incurred by the Insolvency Practitioner for agreeing to act for you and for holding your creditors decision procedure (usually a Virtual Meeting). The Nominee’s fees are paid out of the proceeds of the arrangement if it is agreed by your creditors.
If your creditors do not approve your IVA, then there are no upfront fees to pay.
Typical Example:
- Fee Structure 1
The fee chargeable is typically equivalent to six monthly payments. - Fee Structure 2
A fixed fee of £1,560.00 (+ VAT where applicable) is charged.
Supervisor’s Fees
Once your IVA has been approved by creditors, your Nominee becomes your Supervisor who will be responsible for monitoring and supervising your proposal for its duration (usually over 5 or 6 years). Again, these are paid out of the payments received into the IVA. You do not have to pay these up front.
Typical example:
- Fee Structure 1
The fees that are chargeable for this are usually expressed as a proportion of what is recovered for your creditors in the IVA – usually 15% of realisations (in other words 15%of the total payments you make in your IVA). - Fee Structure 2
The total fees (Supervisor Fee + Nominee’s Fee) and expenses (which are very dependent upon your individual circumstances) are unlikely to exceed £3,650.00 in total. This means that the Supervisor’s fees are usually a fixed fee of £1,750.00. This may vary a little. - Fee Structure 3
Alternatively, fees may be dependent on how much time your Insolvency Practitioner spends in supervising your arrangement and are based on time and hourly rates. This is usually reserved for the more complex cases with many different facets to them.
Please note that all Insolvency fees i.e. Nominee and Supervisors fees are paid out of the proceeds of the arrangement. You would not be required to make any additional payments in respect of Nominee’s and Supervisors costs.
You will be provided with details annually of your Supervisor’s fees in the annual report that they will prepare and which will be forwarded to you and your creditors.
Disbursements
Disbursements are payments made to third parties involved in your IVA, to cover essentials such as the registration fee that comes with being added to the insolvency register.
