IVA proposal

6 January2010

An IVA (Individual Voluntary Arrangement) can be an ideal solution for people struggling with unmanageable debts who do not feel that bankruptcy is appropriate. It can allow them to make reduced payments for (in most cases) five years, after which any outstanding unsecured debt will be written off.

Before you can enter into an IVA, you`ll need to work with an Insolvency Practitioner (IP) to draw up an IVA proposal.

What`s involved in an IVA proposal?

The IVA proposal is the document that details the proposed terms of your IVA.

For example, the IVA proposal will set out how much each lender will receive (calculated on a pro rata basis: depending on how much you owe to each lender), and how much you will be able to pay in total over the set period of time for which the IVA will run (usually five years, but this can vary depending on what your lenders agree).

The IVA proposal will be sent to your lenders, who will be given the opportunity to `vote` on it. 75% of your lenders (by debt value) must approve the proposal for the IVA to come into force.

What happens if my IVA proposal is approved?

If the IVA is approved, you will start making regular payments towards your debts through your Insolvency Practitioner. A typical IVA involves making payments once a month for five years, although this can vary if your lenders agree to a different arrangement.

On successful completion of the agreed terms, you will be legally debt-free. (Note that this applies to your unsecured debts only - an IVA can`t write off your mortgage debt, for example.)

There are some things to remember with an IVA, though. You may be required to contribute most of any increase in income towards your IVA, and if you`re a homeowner, you may be expected to release some of the equity in your home in the final year of the IVA. Furthermore, please note that entering an IVA will have a serious impact on your credit rating.

What if my IVA proposal is rejected?

If your proposal is rejected, you have a choice to make. You can negotiate further with your lenders (submitting a different proposal), or you can explore alternative debt solutions instead. A debt adviser can help you to decide on the best option for your circumstances.

If you`re struggling with unmanageable debt and are considering an IVA, click here for more information or call us on 0800 195 2911.

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