IVA: what does an Insolvency Practitioner do?

8 January2010

Anyone who enters into an IVA (Individual Voluntary Arrangement) will do so with the assistance of an Insolvency Practitioner, or IP. In short, your IP will help you to make the initial arrangements, as well as carrying out the month-to-month running of the IVA.

Introduction to IVAs

In an IVA, you`ll agree with your lenders to repay as much of your unsecured debt as you can afford, after which the remaining amount will be written off. It`s a legally-binding arrangement, and once it is in place your unsecured lenders will not be able to pursue you any further for the debts (unless the IVA fails).

A typical IVA involves making monthly payments for five years (although this can vary depending on what`s agreed with your lenders). Your payments will be based on how much you have left once all your essential expenses, such as mortgage/rent, groceries and bills, have been paid for.

On successful completion of these terms, you`ll be legally debt-free (as far as your unsecured debts are concerned, since IVAs do not directly affect secured debt such as mortgages).

However, an IVA is by no means an easy way out of unmanageable debt. It`s a significant commitment that will leave you with little or no spare income for as long as the IVA is in progress. It will also have a big impact on your credit rating, which will make borrowing money more difficult for the time it stays on your credit report (six years from the time it begins).

Where does my Insolvency Practitioner come in?

Your IP will assist with your IVA from start to finish. Before you can enter into an IVA, your IP will need to write an IVA proposal - with your help - detailing the proposed terms of the IVA, such as how much you can afford to repay to each lender.

If the IVA proposal is accepted by 75% (by debt value) of voting lenders, your IVA will go ahead. Your IP will then take on the role of distributing your payments between your lenders on a pro rata basis (depending on how much each is owed overall), as agreed.

Finally, your IP will be available as a point of contact for all matters regarding the IVA. You will usually have an annual `IVA review` in which your circumstances will be re-assessed to make sure that your IVA is still appropriate. And if you have any problems in the meantime, your IP can answer any questions you may have, and can help to recommend an appropriate course of action if it turns out that you cannot keep up with your existing terms.

For more information on IVAs, click here or call one of our expert debt advisers on 0800 195 2911.

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Tags: iva, insolvency, Insolvency Practitioner, IP

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