IVA is a formal and legally binding document that allows you to get out of debt. This is done by the consent of creditors and under the keen eye of an insolvency practitioner. How an individual voluntary arrangement is set up is a detailed process. However, we have explained it briefly for you!
Before the IVA
The insolvency practitioner should explain all options available to you before you commit to an IVA. You can also get second or third opinions on this from credible debt consultancy services.
Steps of an IVA Process
Step one: applying to the court for an interim order
Your insolvency practitioner will apply to the court for an interim order. This will stop your creditors from taking action against you while the IVA is being set up. They can’t get a court order against you or make you bankrupt.
Step two: discussing your finances and repayments
Your insolvency practitioner will look at your financial situation with you. This will include your spare monthly income, savings, and assets. With the help of your insolvency practitioner, you will work out a repayment plan to your creditors. You will need to offer as much as you can realistically afford, otherwise, the creditors may not agree to it.
Step three: drawing up a proposal
Your insolvency practitioner will help you write a proposal for your creditors and the court. In the proposal, you will agree to repay your creditors in part or in full over a certain period, normally three to five years. Your insolvency practitioner will also prepare a report for the court which includes their opinion as to whether the proposal will work or not. The report and proposal will include:
- a full financial statement
- a proposal setting out the terms
- reasons why the creditors should agree to the IVA
Step four: creditors agree or reject your proposal
Your insolvency practitioner will call a creditors’ meeting at which the creditors vote on whether or not to accept your proposal. If enough creditors vote for the proposal, the proposal is accepted and this is reported to the court. The IVA will then be binding on all the creditors, even those that voted against the proposal.
After the acceptance of the proposal, you can start paying the agreed-upon installments.