Stage 1 – Initial IVA meeting
A licensed insolvency practitioner (IP) will arrange a meeting with you, either face to face or by telephone, depending on the complexity of the proposal. The meeting will involve the discussion of the IVA process and the consequences of entering into an arranged IVA. This includes the rights to challenge the IVA arrangement and what could happen if the repayments are not completed.
The aim of the meeting is to ensure you understand the advantages and disadvantages of the variety of insolvency options available, including bankruptcy, debt management plans and informal debt repayment arrangements. The IP will focus on your individual circumstances, especially where there is a potential impact on assets such as a family home.
It is important that you provide all necessary information, so the IP can be satisfied there are plans in place to avoid financial difficulties recurring in the future. The IP will work out a realistic payment amount over an agreed period of time, which is usually 5 years. This means at the end of the 5 years any debt which was not found to be affordable will be written off.
Stage 2 – The IVA proposal
The proposal will then be compiled to set out the terms of the arrangement between you and your creditors. The proposal will include a detailed insight into your financial history to explain why you are now insolvent, alongside explanations of attempts made to overcome the difficulties.
The proposal will outline the expected duration of the arrangement, so each creditor has a figure and distribution timeframe of how much they can expect to receive over the course of the agreement. Most IVA’s will last for five or six years, although it is possible to arrange a lump sum IVA with just one large payment as full and final settlement.
The aim is to provide a comparison between entering into an IVA instead of filing for bankruptcy, by compiling a comprehensive state of affairs and future cash flow projections. The proposal will set out to explain why the IVA is a desirable option, to encourage agreement from the various creditors.
Stage 3 – The IP’s report
As a nominee the IP must produce a report for both the creditors and the court. The nominee needs to consider your financial position and explain the extent of which the financial information has been verified. This will help the nominee advise whether the proposed IVA has a good chance of being implemented and followed. The report is placed on Court file and is accessible to the creditor at any time.
Stage 4 – Interim order period
It will take time for an IVA to be arranged, so an interim order can be established to stop creditors from taking any further action against you. This will provide you with an added level of protection while the proposal documents are comprised against particularly hostile creditors. As individual circumstances vary significantly, an interim order is not required in every case.
If there are property issues, an interim order moratorium will protect a tenant from a landlord, which is hoping to exercise the right of forfeiture on a property without taking the case to court. It also means legal action cannot continue against you while the interim order is in place.
As part of the application process the designated nominee will report to the court on a number of factors such as the chances of the IVA being approved, whether a creditors meeting will be required and the date, time and place of the meeting. The court will then grant the proposal if it is satisfied that you intend to submit a proposal to your creditors.
Stage 5 – Meeting with the creditors
A meeting with the creditors will be scheduled for the presentation of the proposal on a working day between 10.00am and 4.00pm and is chaired by an experienced nominee. For the IVA to be accepted at least 75% of the creditors at the meeting need to vote in favour of the plans.
It is not uncommon for creditors to propose changes to details within the proposal. If this is the case, the meeting can be rescheduled for another date within 14 days, to allow for any necessary adjustments to be considered and implemented.
If there is no satisfactory outcome from the meeting, it is likely that you will need to consider other forms of debt management such as bankruptcy.
Stage 6 – Implementation of the IVA
If a proposal is accepted, the nominee will notify everyone concerned including you, your creditors and the court. The supervisor will then be responsible for ensuring you meet the terms laid out within the IVA proposal. Contributions are monitored within a designated client account with all payments to creditors paid at agreed intervals as laid out in the proposal.
Stage 7 – Proposal variations
There is every possibility that over the course of an arrangement your circumstances could change, which will lead to a required variation in the proposal. It is not uncommon for a debtor to fall into arrears, to lose their employment or for earnings to fall.
If payments cannot be made a variation meeting with the creditors will be arranged, to discuss the proposed changes. In a similar way to the arrangement of the original proposal, this will also need to be agreed by at least 75% of the creditors at the meeting. If the creditors do not agree the IVA could be cancelled.
An annual review of your income and expenditure will take place every year of the anniversary of your IVA approval, to assess whether your repayment amounts each month can be increased. If your essential living expenses increase over the year It may be possible to reduce the monthly repayment amounts.
Stage 9 – Failure of the agreement
If you fall into any arrears on the IVA arrangement, it will be considered a breach of the agreement. If you do miss a payment you should make contact with the IVA provider, if you have a good reason they may accept a late payment.
If you do miss a payment In the majority of agreements, you will have 3 months to repay any missed amounts, however if the account is still in arrears you will receive a ‘notice of breach’ which could eventually lead to a filing for bankruptcy. Failure of the IVA, may result in interest being backdated on your outstanding debts which will require you to pay more.
If your circumstances change and you are faced with long-term financial difficulties your IP may be able to lower your monthly IVA costs, if your creditors agree.
Stage 9 – Completion of the IVA
Upon successful completion of the IVA period, the supervisor will produce a Certificate of Completion to everyone involved to confirm that the terms within the IVA have been satisfied.
As leading insolvency advisors, we are able to offer advice and support to those considering entering into an IVA. We are always available to discuss the wide range of debt management solutions, so please contact our dedicated team today to start your path to a debt free future.