Insolvency practitioners help people with debt problems to set up an IVA, which is a debt repayment plan. An IVA involves making regular payments to your creditors over a fixed period of time. The amount of money you pay back in this way is proportional to the amount of debt you owe. A qualified insolvency practitioner (IAP) will help you to decide the right repayment plan based on your financial situation and available funds. The plan will be sent to your creditors for their approval.
While many IPs provide an initial consultation free of charge, others require an up-front payment before putting forward an IVA proposal. If your proposal is rejected by your creditors, you could end up losing this money. Regardless, you may want to check whether the IVA proposal is worth the money you’ll pay.
There are benefits to applying for an IVA. Most people will be able to keep their current job. However, it’s important to check the terms of your employment contract before applying for an IVA. For example, some professions require employees to declare their bankruptcy before being able to trade. You may also want to consider an IVA if you have substantial lump sums of money that you’ve accumulated. In this case, you won’t necessarily lose your home or other assets, but you should make sure that you understand the risks.
In some cases, you may have to remortgage your home as part of an IVA. If you are unable to do this, you may lose your home. However, your landlord will not be able to force you out of your home if you’ve kept up your rent payments.
The next stage of the IVA process is putting together a proposal to your creditors. You must gather the details of your income and expenditure and create a proposal that they can approve or reject. After the proposal is sent to your creditors, they have fourteen days to vote on the IVA proposal. If 75% of your creditors agree, the IVA will be approved.
It’s important to know that your IVA will have a lasting impact on your credit rating. The credit agency will record it for six years, so it’s important to consider this carefully. Having an IVA can damage your credit rating and make it difficult to obtain new credit or a mortgage.
You will also have to pay an insolvency practitioner’s fees. This can cost several thousand pounds. However, this is usually included in your IVA agreement. Applying for an IVA will have a substantial impact on your credit score, so it’s important to discuss it with a free debt adviser first. In addition, your creditors will be informed about your IVA – including your mobile phone provider, council, utility providers, HMRC, and trade creditors.
Your IVA provider will review your financial circumstances at least once a year to see if you are still making the monthly payments you can afford. If your circumstances improve, you may also opt to pay a lump sum to your creditors or increase your monthly payments. The payment amount depends on your income and expenditure.