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An IVA is suitable when someone is unable to pay off their debts but does not want to file for bankruptcy. It can be an attractive option to all parties including the creditors as often it presents for them a better result than under bankruptcy. There are certain criteria to apply for IVA :
- Minimum unsecured debt of around £15,000 (no maximum)
- Minimum monthly payments of £250-300 (no maximum)
- Stable monthly income.
How IVA Works
The IVA was designed initially to be a more convenient means for processing individual insolvency cases without incurring the excessive costs and court time involved in bankruptcy. As such there are many elements that are similar to bankruptcy, but the process is simpler and the outcome less severe.
So for example under IVA they are the assets and income that are up for distribution to the creditors; it is the individual who proposes what will be paid into an IVA.
The most professional iva help organizations will do the majority of the work themselves and will only require the debtors for minor activities such as providing evidence and reviewing and signing the documentation.
The application and set up process takes around 4-6 weeks from the point of application, including activities such as fact finding, collection of evidence, drafting the IVA proposal, reviewing and signing, sending to creditors, and voting.
For IVA approval you must receiving a 75% majority of approving votes from the creditors. Most lenders have standard terms for what they will accept, including normally overall reduction in debt by as much as 75%.
The resulting proposed IVA will be based on what the debtor can realistically afford to pay over a sixty month period. Normally it will be made up of 60 monthly payments at an agreed level, however it can also include lump sum contributions from, for example, a release of equity from a property.
The payments into the fund are supervised by the Insolvency Practitioner. There are normally pay slip reviews approximately every quarter, and a full review of the debtors situation every 365 days.
During the period of an approved IVA the creditors are required to freeze all interest on the debts, and they are prevented from pursuing the debts and prevented from progressing any legal action related to these debts.
At the end of the 60 months period, assuming that the IVA has been satisfactorily completed, all of the debts are cleared.
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