If you’ve decided, with professional advice (e.g. from an Insolvency Practitioner) to go for an IVA (Individual Voluntary Arrangement), there are a series of things that will happen.
IVA Overview
Your Insolvency Practitioner will first need to look through your finances, taking into consideration your current income, expenditure, any assets (e.g. house, car etc) and all of your debts. The effectiveness of an IVA, as well as the IP’s services in general, really depends on them having all of the right information, so it’s really important that you ensure you give them all of the details you can.
IVA Proposal
Once you’ve provided the relevant information, your IP will then help you to work out what you can afford to propose as your IVA payments. An IVA basically means offering to pay your creditors a set amount over a set period, after which the debts concerned will be considered settled.
Although your creditors will likely receive less than what they would if you kept to your original agreements with them, they will also likely receive more if they accept an IVA than if you end up going bankrupt. Your IP will be able to draw up a proposal that is likely to be accepted by the creditors, and that is also manageable for you.
An IVA is only an effective measure if you are able to keep up with its requirements, so it’s hugely important that you only commit to making payments that you can realistically afford for the whole of the IVA term.
Creditors
Once you’ve arrived at a proposal, your IP will be able to present it to the creditors. You do not need to contact your creditors direct, as this is all handled via the Practitioner, so you don’t need to worry about having to negotiate with your lenders directly.
The creditors will have a meeting at which they discuss your proposal and vote as to whether to accept it. If they do, this means that as long as you meet the IVA payments, they cannot then pursue you for the debts.
Freeze the debt
As well as mediating between you and your creditors, and coming up with a payment plan that suits you, an IVA also effectively freezes your debt. We all know how stressful it can feel when your debts are spiralling out of control, so an IVA really does make working towards the debt being cleared possible.
No more Credit
Other issues to bear in mind if you go for an IVA, is that you will be unable to get further credit while the IVA term is elapsing. The reason for this is that the purpose of the IVA is to get your debts settled in some way, and the only way to do this is to stop acquiring further lending.
The future
The good news is that once the IVA period is over, you’ll be able to start with a clean slate and work towards a healthy credit rating, as well as solid financial health in general.