Effectively, you will be proposing to your unsecured creditors that all of your available income (after your daily living costs and household bills) will be offered as a monthly contribution to them in full and final satisfaction of all of your unsecured debts. You will typically make the monthly contributions for a period of 5 years.
Your creditors will review the proposal sent to them by the IP and vote on whether to accept or reject your IVA proposal at a creditor’s meeting. Creditors representing at least 75% of those who vote need to vote in favour of the IVA proposal in order for it to be accepted. In most cases if they are likely to receive a higher amount than what they would receive if you declared yourself Bankrupt, they would likely agree to the proposal and you will formally enter into an IVA. Once approved, creditors are unable to pursue you or take any legal action against you providing you adhere to the obligations of the IVA. An IVA should be viewed carefully and all options explored because of the potential consequences for your personal, professional and financial life. An IVA is not always suitable for everyone and it is important that you understand the pros and cons of entering into an IVA.
Once an IVA has been accepted by the required majority of your creditors, all creditors forfeit the right to take any further legal action against you for the recovery of your debt. All creditors must refrain from contacting you directly in relation to the recovery of any debt included in your IVA.
1. Stops interest charges
Your creditors are not permitted to add further interest charges once the IVA has been accepted at the creditors’ meeting.
2. Fixed Duration
Your IVA will have a fixed duration, which is normally set to 5 years. Under the terms of your IVA, any outstanding balances left unpaid when the IVA completes must be legally written-off.
3. Protects home owners
Under the terms conditions of an IVA, your creditors cannot force you into selling your home, even if it has equity within its value. So long as you maintain your IVA contributions and fulfil your obligation by complying with the agreement, your home is safe.
1. Equity clause
The process by which homeowners must make an attempt to release some equity from their property and introduce it into the IVA for the benefit of their creditors. In the event that this is not possible, the term of your IVA will usually be extended by a further 12 months, totalling 6 years.
2. Paying in windfalls
If you benefit from windfall during your IVA you will be expected to introduce some or all of this into the IVA. A windfall could be any amount of money that you did not expect to receive, such as a lottery win, an inheritance or an insurance pay out.
3. Lending restriction
You should not apply or take out any credit during the term and should consult your IP for advice if you require funds, for example, a household item that may need replacing.
4. Damage to your credit rating
Your credit rating will be affected and will stay on your credit file for 6 years from the date that your IVA is approved.