Dealing with significant debt is not only overwhelming, it can also have a negative impact on your life and health. If this is the case, a professional debt management solution is often your best course of action.
While Debt Management Plans (DMPs) and Debt Relief Orders (DROs) may be the best option if you find it difficult to repay your debts, an Individual Voluntary Arrangement (IVA) sometimes represents the most viable solution if you’re eligible for a more formal solution which can allow you to potentially write off your debt after a set period of time. However, before entering into one of these agreements, it’s important to understand how the IVA process actually works.
In this guide, we break down the IVA process step-by-step, providing all the information you need to make the best decision to manage your unique circumstances. We also explore how long the process of setting up an IVA typically takes, from start to finish.
What is the IVA process?
The IVA process describes the individual steps you will need to successfully navigate in order to enter into one of these arrangements. This structured process provides a way for you to manage – and ultimately write-off a percentage of – your debt without having to resort to bankruptcy. The four main stages involved in setting up an IVA are:
- Creditor’s meeting
- IVA agreement
Below, we take a look at these stages in more detail.
What is an IVA consultation?
The IVA process starts with a consultation. This stage simply involves you making contact with an Insolvency Practitioner (IP) directly (find an IP here), or contacting an IVA company, such as MoneyPlus, to ask for professional advice regarding your financial situation. An IVA expert, known as a Licensed Insolvency Practitioner (IP), will at this point carry out a full financial health check. This will include an analysis of your current income, assets, and the amount and type of debts against your name.
Once this assessment is complete, the IP will determine whether or not an IVA is the most suitable solution. If it’s not, they may suggest alternative debt management options. If it is, they can start to put together a personalised IVA plan based on the information provided and your own unique circumstances. There are three separate fees involved in an IVA. All risks associated with an IVA will be discussed on your assessment call.
What is an IVA proposal?
The next stage of the IVA process is the proposal. This step involves creating a comprehensive document that outlines your financial situation in full. Crucially, as the name suggests, this proposal also provides details of your suggested repayment plan, and how you intend to stick to this plan. Naturally, the more realistic and well-put-together a proposal is, the more likely it is that the creditors involved will accept the terms and allow you to enter into the arrangement. For this reason, it’s important to note that an IVA proposal must be put together by a professional IVA expert.
Once the proposal has been put together, it’s then submitted to your creditors for review.
What is an IVA creditors’ meeting?
Following the submission of the proposal, the next stage of the process is the creditor’s meeting. Chaired by an independent Insolvency Practitioner, the purpose of this meeting is to allow all creditors involved to assess your proposed terms and, ultimately, decide whether or not they’re willing to accept the IVA in its suggested form. As a rule, in order for the IVA to be approved, creditors representing at least 75% of the total debt have to vote in favour.
What is an IVA arrangement?
Once an IVA is approved by a meeting of creditors, an IVA arrangement will be presented to you. This arrangement essentially outlines all legally binding terms and conditions of the IVA. This includes your responsibilities, including the regular payments you must make to the Insolvency Practitioner, who then distributes these funds among the creditors. This agreement also highlights the fixed time period you will have to adhere to the agreed-upon terms in order to successfully complete the IVA. Typically, this is five years. However, this can differ depending on your circumstances. It will also outline how remaining debts after this period will be written off.
It’s important to note that from this point in the process, you are legally protected by the IVA. That is to say, creditors cannot take legal action against you. On top of this, all interest on debt is frozen, charges and late fees are stopped, and all creditors are forbidden from contacting you directly.
Only at this point do you start making your agreed-upon monthly payments to your assigned IP.
How long does an IVA take to process?
As a rule of thumb, the process of setting up an IVA typically takes between 60 and 90 days. However, it’s important to note that it can take longer if there are certain complexities or challenges when it comes to you and your IVA company reaching an agreement with your creditors.
The IVA process can be stressful if you’re dealing with it on your own. That’s why, here at MoneyPlus, we help you navigate the challenging first steps into your IVA. To find out more about IVAs, you can visit MoneyHelper to get free debt advice, or to apply for a consultation today, get in touch with our helpful team.