IVA FAQ
Q. How does an IVA work?
A. One of the first steps is for a licensed Insolvency Practitioner (IP) to produce a payment proposal on your behalf, outlining the details of your debt, any assets you have, and your proposed repayment contract.
A meeting will then be held with the IP and your creditors to consider the proposal. If the proposal is agreed to, your creditors are then legally bound by the contract and the IVA commences.
Debt Advisers Direct is a licensed Insolvency Practise and can help to arrange your IVA. The IP has an important role to play in the process and has a duty to ensure that the proposed IVA is fair and reasonable to both you and your creditors.
Q. What are the benefits of an IVA?
A. Should the IVA proposal be approved, all your unsecured creditors are legally bound by it. As long as you keep to your side of the agreement and make all your payments on time and in full, your creditors cannot change their minds on any part of the agreement. You are fully protected from any legal action being taken against you by your creditors.
Q. Do all my creditors have to agree to an IVA?
A. At least 75 per cent of creditors by debt value who vote at a meeting must accept your proposals for an IVA to be approved. If any of your creditors vote against an IVA or do not vote at all, they are still bound by the agreement as long as a 75 per cent majority has accepted it.
Q. Am I required to attend the creditors’ meeting?
A. You are not obliged to attend the meeting in person as we attend on your behalf. However, you must be available in case you need to consider any changes to the proposal that are suggested during the meeting. You can ask for time to consider any changes, and Debt Advisers Direct will always be on hand to advise you.
Q. How much do I have to pay back?
A. In principle, the payment will be based on your surplus income after allowing for the living expenses of you and your family. Your creditors will usually require that these payments be maintained for five years. Debt Advisers Direct will advise you fully about the amount that you should propose to pay into your IVA.
At the end of the agreement the total payments you have made, less the fees payable, will add up to a certain percentage of what you owe to your creditors. This is called a ‘dividend’ and can be any amount between 30 and 100 per cent of your unsecured debt.
Q. What if I am unable to make my payments?
A. Your circumstances may change while your IVA is in progress - possibly because of time off work due to redundancy, ill health or bereavement, etc. - and if you can't keep up with your payments, your IVA could fail. You could even be made bankrupt, where there are genuine reasons, although this very rarely happens. Wherever possible, Debt Advisers Direct will try to renegotiate the terms of the agreement with your creditors, although they are under no obligation to agree to this. We will review your monthly payments on a regular basis.
Q. What happens at the end of an IVA agreement?
A. IVAs are typically set up so that whatever payments your creditors receive over the period of the agreement are considered to be in full and final settlement of their claims against you.
This means that at the end of the agreement, if you have adhered to your repayment plan, the balance of any unpaid unsecured debt is written off and your creditors will have no further claim against you.
Q. Why do creditors accept an IVA and not force bankruptcy?
A. An IVA is a preferable alternative to bankruptcy from the viewpoint of the creditors, as they can expect to get a better return than they would normally receive from bankruptcy.
In practice most creditors will petition for bankruptcy only as a last resort. This is because the fees and costs associated with bankruptcy can be high and, unless there are significant assets to be realised within the bankruptcy, there is often little left for the creditors.
Your creditors will also benefit from the fact that your IVA will be closely monitored.
A. All the costs associated with your IVA are included in the payments you make in to it. You don’t pay anything extra.
We will fully inform you of our proposed fees before you commit yourself to an IVA.
At Debt Advisers Direct, we are committed to being totally clear, honest and fair to both you and your creditors about our fees and any other costs that may be incurred with your IVA. Please take a look at the key facts section on our website.
Q. Will my home be safe on an IVA ?
A. One of the advantages of taking out an IVA as an alternative to bankruptcy is that your home is safe from repossession. If you own your home however, you may be required to partially release some of the equity to increase the total dividend.
Q. Does Debt Advisers Direct belong to a professional body?
A. Our Insolvency Practitioners are licensed by either the Insolvency Service or the Insolvency Practitioners Association, and are members of the Association of Business Recovery Professionals (known as R3). All licensing and professional bodies provide technical, professional and ethical guidelines that have to be followed carefully.
More information is available from the Insolvency Service website at www.insolvency.gov.uk
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