Invocas Financial

An IVA is a contract between you and your creditors and is an alternative to bankruptcy. Your creditors will expect to recover at least as much as the amount of money they would if you had taken bankruptcy as a debt solution.

In addition, they will expect the proposal to contain clauses (such as a right to bankrupt you) if you do not fulfil your part of the agreement.

To succeed, the following guidelines would normally be expected:

• Minimum of 3 creditors
• Minimum unsecured debt of £14,999
• Minimum monthly payments of £200
• You or your partner has a regular income.

The pros:

• You only pay what you can afford, based on your income and expenditure
• It is an alternative to bankruptcy
• Your creditors may write off a proportion of what you owe them, based on what you can afford to repay
• Your creditors are not allowed to chase you for money

The cons:

• An IVA agreement can be in place for up to 5 years. Bankruptcy, can be quicker - lasting between 1 and 3 years
• You cannot borrow money during the arrangement and may find it difficult to obtain credit thereafter
• Failure to adhere to a solution, once accepted, could result in bankruptcy
• Your credit record may be affected

As part of the IVA process, a meeting is called and your creditors vote on your IVA proposal. At this meeting, they all agree how much your IVA provider will be paid.

You then make your monthly contributions and create a pot of cash for your creditors. Your creditors tell your IVA provider how much they can charge in fees and their fees will be taken from the pot. You do not receive a bill at any stage, you just pay the agreed contributions. The amount of fees payable will be fully explained to you before you commit to an IVA.

Read our important information page for further details on IVA fees.

There are a variety of IVAs:

Monthly Contribution IVA – This is probably the most common type of IVA where you pay a monthly contribution as agreed by your creditors.

Joint IVA - This type of IVA is relevant for people who share their money and have built up the debts between them, for example, a husband and wife.

Lump Sum IVA – With this type of IVA, you offer a one-off payment to your creditors. This one off payment usually comes from remortgaging your house or perhaps a donation from friends or parents.

Lump Sum and Monthly Contribution IVA – This is a combination of the above and usually means your IVA will be shorter – perhaps lasting 2 or 3 years, instead of the normal 5.

Before you decide to enter into an IVA, you need to understand how an IVA works.

The whole IVA process takes around 6 weeks and you would normally go through the following stages:

INTERVIEW STAGE - you will speak to a debt consultant. They will run through your financial situation and talk through your options. They will then advise whether an IVA is right for you. If an IVA is the best solution for you, the debt consultant will capture the information they need to draft an IVA Proposal.

APPLICATION STAGE - an IVA Proposal will be drafted which states your assets and how much money you owe. It also details how much you can afford to contribute each month under an IVA and how much money your creditors can expect to receive.

The Proposal will estimate how much your creditors would receive if you were to go bankrupt and the draft proposal will be sent out to you, for you to read over and sign.

You will be asked to provide documental evidence to prove that the information you've provided is correct, for example, pay slips, utility bills, statements etc.

CREDITOR STAGE - when your signed Proposal is received, it is sent out to all your creditors together with a report and recommendation that they should accept the IVA Proposal.

IVAs can only be put together by Insolvency Practitioners (accountants who specialise in insolvency work). As professionals, Insolvency Practitioners act in everyone's best interests (yours and your creditors) and consequently your creditors are guided by what the IP tells them, therefore, only IVA Proposals that they think will be acceptable to everyone will be recommended.

VOTING STAGE - when the proposal is sent to your creditors, a meeting is called where your proposal is discussed and your creditors vote in favour of it or against it.  The meeting will take place about 3 weeks after the proposal is sent to your creditors.

At least 75% of your creditors must approve the IVA for it to go ahead. If it is approved, all creditors must accept the deal and are then said to be bound by it, even if they voted against it at the meeting.

SUPERVISORY STAGE - if the creditors accept the IVA, an Insolvency Practitioner becomes the Supervisor of the IVA. The Insolvency Practitioner will write to all the creditors, telling them the outcome of the meeting and then the IVA formally starts.

An IVA normally lasts for 60 months (5 Years), after which time you are left debt-free from the debts included within your IVA. You should be aware that your credit rating may be affected for a minimum of 6 years.

Normally yes, you will get to keep your home; however, if you enter into an IVA, the agreement may require you to release any equity available in your property to pay your creditors.

Your creditors may suggest changes to the proposal, but they cannot impose them on you - you will decide whether or not to accept them. Generally, if at least 75% by value of your creditors who are represented at the meeting vote in favour, the IVA debt solution will be implemented.

Your IVA provider will work with you to determine what you can afford to repay and make a proposal to your creditors on this basis. This proposal may be less than what you currently owe.

Under a standard IVA you will pay only what you can afford to pay.  The contributions you make are based on what is left of your salary after taking out reasonable living expenses.

These contributions are paid into a pot over a period of time (anywhere up to 5 years), with the accumulated money then being paid out to your creditors. After the defined period of time, the debts included in the IVA are cleared or written off.

To improve the likelihood of your creditors approving your IVA, you must be completely open and honest when speaking about your finances and your creditors. Supplying false information could amount to fraud and constitute a criminal offence.

The IVA is a contract. Your creditors may have promised to write off a large proportion of the money you owe them and in return, you have promised to pay a contribution to them over a number of months. If you fail to do this you will be in breach of contract, or said to be in default.

You must be honest and if you are struggling to meet your contributions, you need to contact the IVA Supervisor as they have certain powers that can ensure your IVA continues, as long as your creditors are in agreement and they original terms of the contract do not fundamentally change.

A windfall clause is generally included in the IVA Proposal. Whether it is redundancy money, inheritance or a lottery win, in most cases any money you receive during the term of the IVA will be paid to your creditors.  You must declare any financial windfalls to your IVA provider.  Even if you're unsure whether money you receive would be classified as a windfall, it is wise to check with your IVA provider.

If your financial windfall will allow you to pay off your debts and IVA fees in full plus statutory interest, then you may no longer be required to make payments and your IVA will complete early.

Take the first step to turning your debt around. By completing our online enquiry form, we will advise whether we can help you with a debt solution and arrange a time to contact you to talk through the options.