What is an individual voluntary arrangement?

Transcription

What is an individual voluntary arrangement?
APRIL 2015
What is an individual voluntary arrangement?
An individual voluntary arrangement (IVA) is a legally binding agreement between you and
the people you owe money to (your creditors). It is an alternative to bankruptcy.
An IVA proposal sets out how you are going to repay the creditors either by way of
instalments, usually over five years, or a short term arrangement if you have a lump sum
of money to put forward. An IVA can be made up of a mixture of lump sum and
instalments. Any unpaid debts included in the IVA are written off when the arrangement is
completed.
IVAs are set up by a licensed insolvency practitioner. They will contact your creditors and
make proposals of repayment on your behalf. The proposals have to be accepted by the
voting creditors who hold at least 75 per cent of the value of your debts.
The insolvency practitioner can also apply for an interim order if creditors’ enforcement
action is imminent.
Am I eligible for an IVA?
To qualify for an IVA you must:
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have a regular income from employment or pensions (you can apply if you are selfemployed but the self-employment should produce regular income)
have disposable income of at least £100 per month
have at least three debts with two or more different creditors
have at least £15,000 of debt (due to the high costs of an IVA)
be able to keep up payments on secured debts, mortgages and secured loans
be given appropriate debt advice
not have any disputed debts
What is the IVA protocol?
Most IVAs are now protocol compliant. The IVA protocol is a set of voluntary guidelines
which many insolvency practitioners follow. The guidelines cover how a straightforward
consumer IVA should be put together and how the insolvency practitioner should behave.
The protocol has been set up to make the IVA process quicker and simpler. Under these
protocols a proposed IVA should be accepted without modification and if the creditors vote
against it, they must disclose their reasons to the insolvency practitioner.
Can I include all my debts?
You can include most of your debts in an IVA, including priority debts although your
creditors may object - see above.
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The following debts cannot be included:
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maintenance, or arrears of maintenance, ordered by a court
Child Support Agency arrears
magistrates' court fines
mortgage, secured loan or rent arrears unless your lender or landlord agrees (which
is unlikely)
student loans
If you have a hire purchase agreement you will need to check your contract as it may
include a clause enabling the creditor to cancel the agreement if it is included in an IVA.
What happens to my home?
If you are a home owner, your insolvency practitioner will normally want to include a
special section within your IVA proposal called an ‘equity clause’. This means that during
the IVA (normally in the fourth year) you would be expected to apply for a secured loan or
re-mortgage to pay back some of the debt. If you cannot do this, your insolvency
practitioner may want you to sell your home instead unless your IVA is protocol compliant.
In these cases, approximately six months before the end of the IVA you will be expected to
re-mortgage to release any equity over £5,000 up to a maximum of 85 per cent of the
valuation less any outstanding mortgage. The equity released is distributed amongst
creditors. The re-mortgage payments must not be more than 50 per cent of your monthly
payments to your IVA and the new mortgage must not be longer than the existing term or
go past your retirement age. The re-mortgage repayments are then deducted from your
IVA payments. If, after that, your IVA payments fall to below £50 a month, your IVA will be
concluded.
If you are not able to re-mortgage, your IVA can be extended for up to 12 months rather
than make you sell your home.
However, if you do not keep up your IVA payments there is a risk you could be declared
bankrupt which could then result in you losing your home.
What happens to other assets?
IVA rules on assets are not as strict as bankruptcy rules and you may be able to keep
certain assets as long as your creditors agree. Any inheritance or other monetary gain will
be passed on the creditors.
What happens if my money goes up or down?
The insolvency practitioner will carry out a review of your income and expenditure every 12
months. If your income increases, you will be expected to increase your IVA contributions
by 50% of the net surplus. If you are made redundant during the IVA you will have to pay
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any monies received that are equal to more than your previous six month’s take home pay.
If your income decreases, the insolvency practitioner can reduce your payment by 15%
without the creditors’ permission.
You could also be allowed one payment break of up to six months. Your IVA will be
extended accordingly. If you fail to disclose any income, assets or debts the insolvency
practitioner can extend your IVA and you may be committing a criminal offence.
What happens if I default on the payments?
If you default on the arrangement you will be given the chance to remedy and/or explain
the default. If you fail to do this the creditors can vary the terms of the IVA, bring the
arrangement to an end, or make you bankrupt.
How else will an IVA affect me?
Your IVA will be registered on the Individual Insolvency Register, which is a public
document, until it is completed or terminated. Records of IVAs are held on credit reference
agency files for six years from the date the IVA began or until the IVA ends if this is longer,
but will be marked ‘complete’ once the agencies are informed of this by the insolvency
practitioner.
You may continue to find it difficult to get credit even after the IVA has been removed from
your credit file as some lenders ask if you have ever had an IVA or been bankrupt in the
past.
IVAs do not hold as much stigma as bankruptcy. It is also easier to continue running a
business and it is unlikely that you would lose your job due to an IVA but it is always
advisable to check that your profession will not be affected. You will not be able to take out
any unsecured credit while going through an IVA and you will have to maintain a strict
budget.
All interest and charges on your unsecured debts will be frozen. Providing you keep to the
terms of your arrangement, you will be protected from any further enforcement action by
your creditors.
Other IVAs
Not all IVAs follow the protocol, especially where there are disputed debts or investment
properties. Lump sum IVAs are available for those who have a low disposal income but
access to capital, including through the sale of their home. Some IVAs are a mixture of
both instalments and a lump sum.
An IVA can be granted even during bankruptcy.This is called a fast-track voluntary
arrangement and you can apply for it by putting a proposal to the Official Receiver after
you have been made bankrupt. Seek advice if you think this may be relevant to you.
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How do I find an Insolvency Practitioner?
Be careful of fee paying organisations who say they will find an insolvency practitioner for
you. Use the insolvency practitioner directory available on https://www.gov.uk/find-aninsolvency-practitioner or www.r3.org.uk Alternatively, you could use one of the free debt
advice agencies listed at the end of this factsheet.
Further help and advice
Citizens Advice Bureaux (CAB)
Online information:
Information about local CABx and opening times:
0344 4111 444
www.adviceguide.org.uk
www.hertfordshirecab.org.uk
Civil Legal Advice
Free legal advice in England and Wales if you’re
eligible for legal aid
0345 345 4345
www.gov.uk/civil-legal-advice
The Insolvency Practitioners Association:
Valiant House
4-10 Heneage Lane
London
EC3A 5DQ
Tel 0207 623 5108
www.insolvency-practitioners.org.uk
The Association of Chartered Certified Accountants:
29 Lincoln’s Inn Fields
London
WC2A 3EE
Tel 0207 059 5000
www.accaglobal.com
Business Debtline:
Offers a free, confidential and independent helpline for self-employed people and small
businesses who have debt problems.
0800 197 6026 (Mon - Fri 10 am. - 4.00 pm & 24 hour answering machine)
www.businessdebtline.org/
National Debtline:
0808 808 4000
www.nationaldebtline.org
StepChange Debt Charity (formerly CCCS):
0800 138 1111
www.stepchange.org
Payplan:
0800 917 7823 or email [email protected]
www.payplan.com
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The Debt Counsellors
0300 456 2726
How you can contact Hertfordshire County Council
Our website
Visit our website for more information about support for carers and adult social care - apply
online for meals on wheels or a Blue Badge and make a referral for care services
www.hertsdirect.org/adults
If you would like more information about benefits and debt you can find a wide range of
Money Advice Unit factsheets
www.hertsdirect.org/benefits
Hertfordshire Directory
Find national and local community groups, charities, services and activities
www.hertsdirect.org/directory
HertsHelp
Independent information and advice on local community services and care funding
Telephone: 0300 123 4044
Minicom: 0300 456 2364
Email: [email protected]
Call us
For information and advice on how to get care and support
Telephone: 0300 123 4042 Text Message: 07797 870591
Textphone: 0300 123 4041
Calls to 0300 cost no more than a national rate call to a 01 or 02 number
If you are worried that you or someone you know is at risk of abuse or neglect
Call us on 0300 123 4042 (24 hours a day)
If you need help to understand
Call 0300 123 4042 if you would like help to understand this information or need it in a different
format. You can also ask to speak to someone in your own language.
This information is correct at time of writing. It is for guidance only and is not an authoritative statement of
the law
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