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The IVA application process

The first step in obtaining an IVA is to set up a relationship with a Licensed Insolvency Practitioner to handle all aspects of the IVA for you. When you begin the process of obtaining an IVA with us, we will recommend a Licensed Insolvency Practitioner who is suited to your individual situation. Usually, the Licensed Insolvency Practitioner will interview you or ask you to complete a questionnaire in order to decide whether they will take your case forward. This will look at areas such as your total debts, your creditors and your current finances. You should answer all questions as fully and honestly as possible.

IVA proposal for creditors

If the Licensed Insolvency Practitioner decides to handle your IVA, they will draft a proposal for your creditors. This written agreement sets out how much you will repay to them, and over what period. IVAs are typically set up to last five years, although other periods are also used. The amount you will repay each month is based on your disposable income – whatever you have left once your regular monthly expenses have all been paid.

Once the IVA proposal is complete, the Licensed Insolvency Practitioner will then put it to your creditors on your behalf. In particularly difficult or challenging cases, a form of legal protection known as an ‘interim order’ may be granted. The interim order protects you from your creditors while the terms of the IVA are being determined and agreed, and bankruptcy proceedings cannot be started against you while it is in force.

Creditors decide on your IVA

Once they receive your IVA proposal, your creditors vote on whether to accept or decline it. For your IVA to go forward, creditors representing 75% of your total debt must agree to the IVA. If that level of commitment is achieved, then the rest of the creditors are obliged by law to agree to the IVA.

In theory, all the creditors meet in order to discuss your IVA and decide whether to accept it. In practice, very few will actually attend the meeting, since they will have already submitted their vote by post. If any creditors fail to vote, it is assumed that they are in favour of the IVA.

Creditors often agree to IVAs because they often get more money back through the IVA than they would if you were declared bankrupt. Instead of sequestering your assets, selling them and using the proceeds as payment against your debts, they get the assurance of a regular payment for the term of the IVA.

Once the IVA is agreed

If your IVA is agreed, you must begin making your monthly repayment to the Licensed Insolvency Practitioner as agreed. The Licensed Insolvency Practitioner will then make payments to your creditors on your behalf. You do not have to deal directly with your creditors.

The IVA is a legally binding arrangement, so it is vital that you keep up repayments. Your financial situation will be reviewed regularly, to determine whether your circumstances have changed.

Once the IVA is complete

Once the period of the IVA is complete, you are free from your debts – regardless of how much of the debt has actually been paid off. Any outstanding debts are written off, in a process known as ‘composition of debts’, and you are free to make a completely fresh start with your finances, debt-free.

Starting the IVA process

To start the IVA process or to simply get some impartial advice about the benefits of IVAs, contact Debt Options, apply online or call us on 0800 234 3605 to discuss the options.