How to Apply for an IVA

If you’re just starting to think about applying for an IVA, it can easily get overwhelming and understandably so.

That’s why it pays to work with a professional when you decide to apply for an Individual Voluntary Arrangement.

There’s more to it than just finding a trusty money advice service that can help you out, but rest assured, we’ve got you covered.

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An IVA is a formal and binding arrangement between you and your creditors. This agreement allows you to repay your obligations over a set period of time and it could be the difference between bankruptcy and debt payback for some people. But how do they work?

To know more about IVAs, how to apply, the process, the benefits, and other details, then read on! In this guide, we will walk you through each step you’ll need to do in order to stop debt collectors and recover financial control. So, let’s get right into it.

Before the IVA is set up

When applying for an IVA, you’ll first need to collaborate with an Insolvency Practitioner (IP) to draft the initial IVA proposal before it can be implemented. This lays out the parameters of your IVA, such as how much you can afford to pay each of your creditors and how long you’ll be able to pay them.

Also, before you commit, the IP should disclose all of your options to you. That way, you can make sure that getting an IVA is the right option for you. The IVA pamphlet can be found on the website of the Association of Business Recovery Professionals.

Now, let’s discuss the steps on how to apply for an IVA.

Setting up an IVA – The Process

Below is the entire process for setting up an IVA, from start to finish:

Step 1: Learn How an IVA Can Help You

An IVA is a formal agreement between you and your creditors and it’s one that might assist you in repaying your debts at a reasonable rate. They’re legally binding and can assist you in resolving your obligations, however, you can only obtain one with the help of an Insolvency Practitioner (IP).

Unlike bankruptcy, an IVA might give you more control over your assets. You agree to pay an IP on a regular basis, and the money will be split between your creditors. You can find out more about what IVAs are and their benefits in this link.

Step 2: Speak with a Professional Debt Advisor

It’s a major decision to enter into an IVA, therefore it’s critical that you consult with a professional debt advisor should you want to apply for one. By getting IVA advice, you can get free debt advice and information so that you are aware of all of your options.

Is it better to file an IVA or go bankrupt? When it comes to payments, may a bailiff refuse one? These are the types of questions and concerns our experienced debt advisors can answer. So, if you’d like more information about IVAs, get in touch with our debt advisors today.

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Step 3: Collect All the Financial Information you Need

You need an IP to set up an IVA. They’ll first double-check that you’re in compliance with all of the IVA’s requirements. Next, they’ll thoroughly assess your financial situation after that’s been validated and it has been concluded that an IVA is the best debt solution for you.

This information is usually gathered ahead of time.

Now, when examining your financial condition, your IP will assess everything including your monthly savings, assets, and spare cash.

To raise additional money to repay your creditors, you may be advised to include assets such as property or a car in the IVA.

Certain assets, such as a building or vans you need to run a business or a car you need to drive to work, may not be included.

With the help of your IP, you’ll come up with a repayment plan for your creditors. If you can’t provide as much as you agreed to lay done, the creditors may refuse to accept the IVA.

Step 4: Apply for Either an Interim Court Order or an Adjourning Court Action

While your IVA is being set up, your IP may petition the court for an interim order to prevent your creditors from initiating action against you.

This means they won’t be able to get a court order against you or try to force you into bankruptcy. Interim orders are rare and your IP may be able to help you get any court action rescheduled instead.

If you’re getting unsolicited calls from enforcement agents or a bailiff coming to your house, it’s possible that your IP will petition for an ‘interim order’ or take other steps to get any pending court action rescheduled.

Step 5: Build your IVA Proposal

A proposal for creditors and the court will be written by your IP. You will have to agree to repay your creditors in part or in full over a set length of time, usually three to five years, in the proposal.

In addition, your IP will write a report for the court that contains their view or assessment on whether or not the plan would be successful. Included in the report and proposal are:

  • A full financial statement including all the details of your income, assets, properties and debts
  • A proposal setting out the terms of the proposed IVA. This includes the length of the arrangement and how much of the debts you intend to repay
  • The reasons why the creditors should agree to the IVA and that they will get more under the proposal than they would if you go bankrupt

The proposal will describe your financial situation and the amount of money you will be able to pay back to the companies to which you owe money.

The repayment period, which is normally between 3-5 years, will also be indicated.

Depending on the conditions and the possibility of creditors accepting it, your IP will assist you in determining the best solution.

The IP should take into account both your ability to repay the debt and the rights of the creditors to be reimbursed.

If you insist on incorporating specific terms in the proposal notwithstanding your IP’s advice, the IVA may be dismissed by the court.

Step 6: Consideration Process

Your IP will call a creditors’ meeting after your proposal has been finalised. It’s possible that this will take place in your IP’s office, but it’s more likely to take place over the phone.

If this is the case, your creditors will be given a phone number and a pin code so that they can attend the meeting.

You can also attend this event if you want to, and it’s actually strongly encouraged that you do so.

After that, your Insolvency Practitioner will present your proposal to the creditors who are responsible for your debts, and each creditor will be given a chance to vote on it.

Step 7: The Decision

Whether or not your IVA should be approved will be decided by each creditor. The amount of debt they have in relation to your total debt amount determines how powerful that vote is.

You’ll need 75% approval to get an IVA approved.

It’s worth noting that even if one (or more) of your creditors rejects your IVA request, as long as a majority of 75% agrees, the conditions will be binding on ALL creditors.

What are the Odds of my Creditors Agreeing?

The odds of creditors agreeing varies per care. This is usually determined by the strength of your application as well as the apparent viability of the precise repayment arrangements.

IVA’s have been around for a while as a legal form of debt payback, and their popularity is growing. Thus, an IVA is something that most creditors are already familiar with.

If your IVA has been accepted, you won’t have to deal with bailiffs now that you’re protected from debt collection actions.

Furthermore, if you follow the terms of the agreement, your outstanding debt will be forgiven at the conclusion of the defined term.

You should expect to receive formal confirmation as soon as the decision is made, as well as instructions on how to actually make the payments you’ve agreed to.

Can I set up an IVA myself?

While you can apply for an IVA yourself, you’ll need to consult with an IP to actually set one up because they’re legally binding and can be difficult to set up.

The Insolvency Practitioner will give you debt advice and assist you in putting together the initial IVA proposal, managing all the administration, and overseeing the IVA for the duration of the IVA.

It’s a legal process, and you can’t do it alone.

Can you apply for an IVA online?

Yes, you can! You can do this easily by completing the IVA online application form.

However, before applying, it’s worth talking to a professional who can help guide you to see whether you need an IVA first so you can be fully prepared.

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After that, the insolvency counselors will contact you at a time that is convenient for you to discuss your debts and financial status. Between 20 and 30 minutes is all it takes.

How quickly can an IVA be set up?

If you decide an IVA is the right debt solution for you, it can be set up relatively quickly.

The general advice is that your individual voluntary arrangements could be ready to go in a period of 4-6 weeks, barring any unforeseen circumstances.

Your IP may file a petition with your creditors to prevent them from taking action against you while the IVA is being set up. After that, they’ll begin examining your finances.

Your IP needs to know how much money you make so that they can figure out how much individuals can afford to pay back. The information they’ll require will include your bank statements, credit history, and any assets you have, such as your home, car, or a lump sum inheritance.

Your debts will be the next thing they’ll need to know about you — how many creditors you have, how much money you owe, and what types of debts you have. It’s critical that you give an accurate record of each loan so that you can include it in your monthly payback schedule.

Once your IP has all of this information, they’ll prepare an IVA proposal for your creditors to accept before submitting it to them.

What Happens if my IVA proposal is rejected?

After the creditors’ conference, if the IVA plan was refused, the creditor could re-apply for a charging order.

The debtor’s lifestyle leads a creditor to believe that an IVA is likely to fail in terms of supervision in the last scenario. Initially, creditors look at how the debts were accumulated.

Your plan will be rejected if less than 75% of creditors support your individual voluntary agreements. If this occurs, your IP will assess the problem and make recommendations for the best course of action.

This could imply that the plan is reworked and presented on a new basis, or it could indicate that you are given other options to consider (such as bankruptcy or debt management).

What Happens Next?

Now that you know how to apply for an IVA and have one set up, naturally, you should know what comes next. Let’s run through the next steps and additional details here:

Annual Review of Your IVA Debt

Each year, a review is usually undertaken to ensure that you’re still able to make the agreed-upon instalments.

You can expect more financial checks, but nothing will change as long as you’re able to make the agreed-upon IVA payments on time.

It’s just an issue of time and consistency at this point.

Do I Qualify for an IVA?

There are several factors that need to be considered in order for you to qualify for an IVA. You can discuss all these factors in detail with a debt management plans professional before you apply for an IVA.

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But, generally speaking, most UK residents can avail of an IVA if they fit these criteria:

  • Single persons where debt is solely in one name
  • Married individuals or those living together where debt is in joint names
  • Self-employed individuals
  • Business Owners
  • Homeowners
  • Tenants

Restrictions

There is no minimum or maximum amount of debt that can be included in an IVA, thus it’s a flexible solution.

There are few impediments to adopting an Individual Voluntary Arrangement if you are a resident of England, Wales, or Northern Ireland and are not under a bankruptcy order, for example.

The categories of debt that can be included in an IVA, as well as some considerations for homeowners, are the key limitations.

IVAs for homeowners

It’s quite unlikely that your mortgage will be included in your IVA submission. It’s because your home is already secured against the debt.

The approval of mortgages is feasible if your lender agrees to the request, but it’s quite rare.

During an IVA, however, your mortgage payments will be protected.

Your Insolvency Practitioner will only make repayments that are proportional to the amount owed on your mortgage, ensuring that people have enough money to keep their homes afloat.

What happens if my circumstances change during my IVA?

In an Individual Voluntary Arrangement, changing circumstances are usual. In the event that their financial condition deteriorates, whether for the better or worse, IVA holders can rely on their Insolvency Practitioner.

Some of the most typical alterations that people experience during an IVA are listed below.

Payment Holidays

If your financial situation has deteriorated to the point where you are unable to meet your monthly obligations, or if you have unexpected, short-term financial difficulties, your Insolvency Practitioner may be able to negotiate with your creditors to grant you a ‘payment holiday,’ which will allow you to restart your debt repayment process.

Payment Reductions

Your credit score might be severely harmed if you default on payments. If your ability to repay your debt in the long run is going to be harmed by a change in circumstances, the best advise is to try to minimise the amount you pay.

Your Insolvency Practitioner, who will negotiate on your behalf, will once again handle this.

Additional Contributions

During your IVA, it’s extremely likely that your financial situation will improve, in which case you should seek the assistance of your Insolvency Practitioner.

You may be able to use cash injection to make additional payments to your creditors, or you may be able to use a lump sum to complete your IVA early and start rebuilding your credit report.

Summary

To conclude this detailed guide, we do think it’s worth getting an IVA if you need help improving your financial situation. Being debt-free doesn’t have to be as troublesome or difficult as you think, especially when you have programs like IVA’s readily available.

It may take some time to understand all of the steps, factors and details, but once you’ve found a suitable plan or arrangement for you, it could be the beginning of an easier, less in-debt life for you.

Finding a payment plan that suits your budget along with a skilled and trustworthy IP can easily be had. So, if you think you’re ready for an IVA, contact us today so we can help you out.

IVA Debt Help Information

If you want to know more about the debt help plan of an IVA we have all articles related to individual voluntary arrangements here:

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