Gain control of your debts

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You will need to have a minimum level of debt, usually at least £10,000, and a minimum level of disposable income before we can consider you for an IVA. We will discuss this in more detail with you once we have conducted a full assessment of your situation.

How is an IVA set up?

An IVA has to be set up by an insolvency practitioner (IP), who is usually an accountant or solicitor who is authorized to set up IVAs. Once an IP has agreed to make an IVA proposal for you they can apply to the county court for an interim order, which stops your creditors starting bankruptcy proceedings against you.

The IP then sends the IVA proposal to your creditors and arranges a formal ‘creditors’ meeting’ at which creditors will vote on whether to accept the IVA.

If 75% (by value) of your creditors agree to the proposal your IP will supervise the arrangements and ensure that you make the agreed payments.

Please note that it will take time for an IVA to be established and there is no guarantee that your creditors will accept the proposal. Since you still need to make payments to your creditors, we will set up a Debt Management Plan until the IVA proposal is accepted. Upon acceptance, the set-up fees for the Debt Management Plan will be refunded to you.

The advantages of an IVA

• At the end of an IVA, usually five years, you will be debt free. N.B. only unsecured debts within an IVA may be written off at the end of the period. Any debts not included in the IVA will remain outstanding.
• Creditors cannot contact you direct.
• Anyone who is a sole trader or partner can continue to trade, and therefore generate income which will go towards repaying creditors. They would not have a call on your personal assets.
• An IVA does not impose the restrictions imposed by bankruptcy, for example you can continue to use your bank account.
• If you’re in a profession – the financial sector, police, armed forces, for example - where going bankrupt could lose you your job, an IVA could be preferable, though it may not always protect your job.
• You will not automatically lose your house, though you may have to use the equity in your home to pay creditors.

The disadvantages of an IVA

• An IVA is in place for five years. Bankruptcy is only one.
• Your credit rating will be affected for 6 years despite the fact that an IVA will last for 5 years.
• Only unsecured debts can be included in the IVA. Other debts not included in the IVA will obviously remain outstanding at the end of the IVA term.
• 75% (by value) of your creditors must agree to the IVA.
• If an IVA fails, you may be made bankrupt.
• The insolvency practitioner administering the IVA may insist on equity in your home being released to pay off some or all of the debt. The ability to obtain a mortgage may be restricted and is likely to be on less favourable terms (i.e. may attract higher interest rates). You need to be sure that you can afford these higher repayments if your home is remortgaged.
• If you are unable to obtain a remortgage, the IVA can be extended for up to 12 months.
• Details of the IVA will be held on a public register maintained by the Insolvency Service.

How much will it cost?

The Insolvency Practitioner will charge fees for its role as the nominee and as the supervisor. 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.

Nominee fee

The nominee fee is likely to be in the range of £1500-£1800. This covers the Insolvency Practitioner’s work in setting up arrangement such as creating the actual proposal to your creditors, establishing a meeting with the creditor to discuss the proposal and considering any changes the creditors may request.

The Insolvency Practitioner 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).

Supervisor’s fee

The supervisor’s fee covers the on-going monitoring and supervision of the IVA. This will typically be around £3500-£3800. These fees will be taken from your monthly contribution to the IVA and will be disclosed in full by the Insolvency Practitioner before you agree to proceed.

The calculation of the supervisor's costs and fees will depend on the proposal and is therefore subject to your individual circumstances so the above is only an estimate of the likely costs.

Warning

A significant amount of your payments are taken to meet your Insolvency Practitioner’s fees, so if your IVA fails you will remain liable for the balance of your debt and the balance of any fees already incurred. It is therefore essential that you maintain the agreed level of monthly payment.