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An IVA, or Individual Voluntary Arrangement, to give it its full name, is one of the options that you can consider if you are facing debt problems. Here we consider the requirements to qualify for an IVA, and the suitability of entering into this government-backed scheme.
We also examine how Shire Direct can help you arrange an IVA, its implications, and the advantages and disadvantages associated with the scheme.
Table of Contents:
In view of the increasing number of borrowers that are experiencing Debt Problems in the UK, Shire Direct have introduced an extensive range of Debt Management solutions to accommodate differing personal circumstances.
Our aim is to help our customers to regain control of their finances, and in this respect, our principal objective in these situations is to focus on our customers’ priority debts. Priority Debts are those that if not attended to, will have the most damaging effect on an individual.
The main Priority Debts are Mortgage (or Rent) repayments. If these are not met, then the individual is seriously at risk of being evicted from their dwelling place.
Other Priority Debts include:
Once your priority debts are taken care of, the remainder of your unsecured debt will then be considered and proposals made for an Individual Voluntary Arrangement with your creditors.
The Individual Voluntary Arrangement (IVA) is a government scheme to help people out of serious debt problems. The IVA is based on schemes that have been successfully operating in Australia and Canada for several years.
The IVA is a legal process that provides legally binding protection from your creditors by entering into a repayment agreement with them. Whilst in operation, the IVA will be supervised by a licensed Insolvency Practitioner, usually a Chartered Accountant, who initially prepared your proposals for entering into the IVA.
Generally the IVA is arranged over a 60-month (5-year) period, and during this time, it is your Supervisor’s aim to arrange for you to be debt-free at the end of this term. In essence, by entering into an IVA, it is possible to have up to 70% of your unsecured debt legally written-off. At the same time, provided you maintain and adhere to the terms and conditions imposed on you during the course of your IVA, you will benefit from having just one affordable monthly payment, and will also enjoy protection from your creditors taking any further action against you.
Firstly, your financial circumstances must be carefully examined to ascertain that you are likely to qualify to enter into an Individual Voluntary Arrangement. Thus we have to rigorously report full details of:
a) Your income from all sources
b) Full details of your weekly/monthly expenditure, including:
We will prepare an in-principle Proposal for the IVA, which will then be referred to a licensed Insolvency Practitioner (IP), who will ultimately be responsible for supervising the IVA arrangement.
The IP, or your Supervisor, will be responsible for all the payments required under the terms of the IVA, and you will normally be required to make regular monthly payments, usually over a five-year period. At the end of this 5-year term, any balances remaining on your unsecured debts will be legally written-off.
You should be aware that if you are a homeowner, you will normally be required to release any available equity from your property at the outset. (This is generally based at 80% - 85% of the value of the property at the time). Raising this money will usually be achieved by arranging a remortgage or secured loan on the security of your home, the proceeds of which will be paid to your creditors in part-settlement of your debts.
Once your IVA is agreed, all interest and charges on your unsecured debts are frozen. Your Supervisor is required to review your financial situation at the end of each year, and as a result, the Supervisor may require that your monthly payment be altered.
It’s important to note that the Individual Voluntary Arrangement (IVA) does not have the stigma that is usually attached to bankruptcy, and so the impact on your reputation is likely to be minimal. The IVA will not be advertised in the press, although the transaction will be recorded on your credit record, as well as on the IVA Register, which is held by the Department of Trade and Industry (DTI).
IVA Case Study
Because an IVA can usually take 3-6 months to set up, a Debt Management Plan will usually be proposed initially so as to rapidly put you back in control of your payments, and is intended to take the pressure off your financial situation until the IVA is approved and started.
Case Study 1
Mr and Mrs H were struggling to maintain their financial commitments. Their rent payment was £525 per month, their monthly household bills were £1,141 per month and the contractual payments for their £45,548 of unsecured credit totalled £1,011 per month. This represented total monthly commitments of £2,677.
They only had a joint net monthly income of £2,133 so it was therefore determined that the amount available to fund their credit commitments was £467 per month.
Proposed Solutions:
a) Debt Management Programme
As an IVA can usually take 3-6 months to set up, a debt management programme was initially proposed with a monthly payment of £467 resulting in a total saving of £544 per month. This immediately relieved the pressure and enabled Mr & Mrs H to maintain their rent payments.
b) Individual Voluntary Arrangement (IVA)
Following on from the Debt Management Programme, an IVA was then proposed, again with a monthly payment of £467 and a saving of £544 per month. During the 5 year term of the IVA Mr & Mrs H will have paid back £28,020, representing a 39.5% reduction in their total unsecured debt. Their creditors will then write off the remaining £17,528.
Case Study 2
Mr & Mrs S owed a total of £143,630 in unsecured borrowing with 19 different creditors. Their monthly contractual payments were now £2,419 a month. Mr S’s income had dropped due to a lack of overtime and a short period where he had been unable to work due to illness. This had led to multiple missed payments on many of their accounts and they were now finding it hard to maintain their ongoing monthly commitments.
Proposed Solutions:
a) Debt Management
Due to the complexity of the case because of the number of creditors, the time taken to set-up an IVA is likely to be 6-months or so. Accordingly, a Debt Management Programme would generally be proposed, with an affordable payment of £725 each month. This action would result in a reduction of £1,694 each month and the be much more manageable for Mr & Mrs S.
b) Individual Voluntary Arrangement (IVA)
Following on from the Debt Management programme, in this case, an IVA would be proposed with the same affordable monthly payment of £725 per month. At the end of the 5-year period, Mr & Mrs S will have paid back a total of £43,542, resulting in almost £100,000 being written off, representing an approximate 70% reduction in their total debt.
If you are experiencing pressure from your creditors and finding it hard to cope financially, it’s highly unlikely that borrowing more money is the ideal solution. The IVA is an excellent vehicle to tackle and manage your debt, and whether you are a homeowner or a tenant is largely irrelevant.
There are however certain minimum criteria, which have to be satisfied before you can be considered for an Individual Voluntary Arrangement, and these, are:
If you can satisfy these aspects, it’s very likely that an IVA could well be an appropriate solution for you.
Advantages
Disadvantages
Yes we can!
…provided that you have at least £15,000 of unsecured debt, with at least 3-creditors, and can afford to pay a minimum of £200 towards the repayment of your unsecured debt, then the answer is almost certain to be “Yes!”.
Interested – like to know more?
Then please don’t hesitate to call us. Here at Shire Direct we pride ourselves in being able to provide our customers with the individual attention that many of our contemporaries lack, and we always strive to make the process as fuss-free and painless as possible.
We will of course undertake an analysis of your financial situation. We will then work out what priority debts you may have, such as mortgage, HP, secured loan commitments, utility bills etc. This analysis will also include the basic costs of living such as food and your general household living costs. Once these figures have been established and assessed, we will be in a position to gauge the amount of unsecured debt that remains. It is this sum, which will determine the proposed payment to your unsecured creditors.
From this information, we will usually be in a position to provide you with a budget that is both manageable and affordable, and which is designed to put you back in control of your financial situation, and in many cases – will help you to keep your home.
So, whatever your circumstances, and whatever your needs, our service is geared to providing the most appropriate solution for you. Thus if you are experiencing problems with debt, and have difficulties in making ends meet, don’t hesitate to call us. Our aim is to leave our customers with the simple task of signing the documents, in the sure knowledge we have carefully weighed up your situation, discussed the various options open to you, and completed the paperwork on your behalf.
If you would like to discuss how an IVA could help you manage your debt problems, please call us in confidence. You’ll find our approach to be friendly yet professional and not in the slightest bit stuffy.
Our Help-line, 08000 282 281 is open until 10.00pm daily, including weekends, and your call is free and without any obligation.
Make that first step of regaining control of your finances – call us today!
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