IVA (not available in Scotland)

An IVA is an Individual Voluntary Arrangement. This is a contractual and legal arrangement between a debtor and their creditors to repay their debts at a reduced rate over a reduced period. For some people an IVA can offer a quicker and more certain route to clearing debt than a debt management plan (DMP).

In order to qualify for an IVA the debtor must be “insolvent”. This generally means that the debtor’s unsecured debts outweigh their assets (often equity held in their home) and they are unable to repay their debts when they fall due.

An IVA is often used as an alternative to bankruptcy. It can help to protect assets (such as a home), avoid some of the publicity associated with bankruptcy, and to ensure a higher return for creditors.

To qualify for an IVA you will normally need more than £15000 of unsecured debts distributed around at least three creditors. You would normally need to be in a position to repay £200 per month or more towards the debts for the duration of the IVA (which is often five years). These figures are guidelines and every case is different. Please contact us to discuss your case as an IVA may be possible in certain circumstances even if these criteria cannot be met.

Some people are able to introduce lump-sums into an IVA. This might be from the sale of an asset or a contribution from another person. In such cases a different type of IVA might be possible whereby the lump sum serves as an alternative to making contributions over a period of years.

If you have assets they will be considered in an IVA. For example if there is equity in your home you may be required to release some equity during the IVA (for example by remortgaging) to help repay creditors.

You will need to engage the services of a Licenced Insolvency Practitioner to work with you on your IVA proposal. It is their job to work with you to establish a fair level of repayment to creditors and to seek the agreement of your creditors to such an arrangement.

If 75% of your creditors agree to the proposal put forward (or fail to object to it) the IVA will be binding on all creditors. This gives you protection against any further recovery activity on the debts.

Provided you meet the commitments made in your succesful IVA proposal you will no longer be liable for any remaining debt at the end of the agreed term. During the IVA there will be restrictions on your expenditure in order that you are able to contribute what you can reasonably afford to the IVA. The term of an IVA and therefore these restrictions is usually five or six years depending upon your circumstances.

The avoidance of bankruptcy, protection of the home, and defined repayment period are major advantages of IVA’s.

The selection of a good Licenced Insolvency Practitioner is vitally important. As with all businesses the quality of service varies greatly between firms. Should you wish Bright Oak can guide you towards an Insolvency Practitioner who specialises in cases similar to yours and who has received excellent client and professional feedback in the past.

Anyone entering into an IVA should clarify carefully with the Licenced Insolvency Practitioner the implications for their home. While it appears a significant amount of your debts may be written off you may find in reality these unsecured debts are in part transferred into secured debt on your home (via an increased mortgage) that may take many extra years to repay.

In recent years creditors have tightened the criteria they use to decide whether to support IVA’s. For this reason many people find they are unable to enter an IVA and need to look at other options.

IVA’s also have a very significant effect on a credit record which is likely to be similar to bankruptcy. Any previous IVA may also need to be declared on mortgage applications for many years after an IVA is completed even if it is no longer visible on a credit record. Like all debt solutions there are significant advantages and disadvantages that go along with using an IVA to resolve debt concerns. These factors vary between person to person based on their unique personal circumstances. Please contact us if you’d like to discuss whether an IVA could be the right option for you.

Bright Oak refers IVA cases to insolvency practitioners Jones Giles. We refer to Jones Giles as they have a reputation for high professional standards and previous clients have provided positive feedback upon their services.

Where a client makes a decision to use Jones Giles to propose an IVA and Bright Oak complete a detailed factfind for Jones Giles, part of the nominees fee will be paid to Bright Oak Ltd to cover the element of the work they have done.

An insolvency practitioner will charge fees for its role as the nominee and supervisor of an IVA. A separate fee is payable for the Insolvency practitioner’s work in each of these roles. The insolvency practitioner will also charge you for various additional expenses (disbursements).

The nominee fee is a fixed fee and covers the Insolvency Practitioner’s work in setting up your proposal to your creditors. This work includes: holding an initial client meeting (by telephone or in person), fact-finding, providing general advice, preparation of a statement of affairs, ingathering supporting documentation, preparing an IVA proposal, presenting the IVA proposal to creditors and holding the meeting of creditors.

The nominee fee charged by Jones Giles is likely to be in the range of £750 to £2500 plus Vat.

Jones Giles will be paid the nominee fee out of the first payments you make into the IVA and these will not be paid to your creditors. This means your accounts will go into arrears (or further into arrears).

The supervisor’s fee covers work including collecting contributions, agreeing creditor claims, making quarterly distributions to creditors, annual reporting to creditors, dealing with correspondence and queries from creditors and the client, closure of the IVA and making the final dividend payment to creditors.

The calculation of the supervisor’s costs and fees will depend upon the proposal and is therefore subject to your individual circumstances. The supervisor fee charged by Jones Giles is likely to be 15% of your monthly contributions plus Vat.

It is up to you to fix the basis of the supervisory fees as this will form part of your proposal to creditors. Creditors representing 75 per cent of the debt included in the proposal must approve the proposal, including the fee, before it can be accepted. The level of the supervisor’s fees will also affect the return to your creditors under the arrangement and will therefore effect their decision to accept your proposal.

Warning if your IVA fails : As a significant amount of your payments into an IVA are taken first to meet your insolvency practitioner’s fees, if your IVA fails you will remain liable for the balance of your debt and any insolvency practitioner fees and costs already incurred.

Other Debt Solutions?

Debt Management Plans

How are Bright Oak regulated?