Step 1 – find an Insolvency Practitioner
Because of the legal nature of IVAs, you can only make your application through a qualified Insolvency Practitioner. This is someone who is usually a trained accountant specialising in insolvency practice, and who knows all the legal ramifications and pitfalls of entering into an IVA. You can find lists of them in the phonebook or online, or sometimes the Insolvency Service may be able to put you into contact with someone in your area.
Step 2 – get all your paperwork together
In order to consider whether you are suitable for an IVA your Insolvency practitioner may want to look at all of your financial papers. This will include information about your income and debts, including your secured debts such as mortgage, car loans or HP agreements. They will also ask for a list of all of your assets. If they agree you are suitable for an IVA, they will ask you to prepare a household budget so they can assess how much surplus income you have every month prior to making your debt payments.
Step 3 – Create a budget
Your budget should be carefully created to allow you to have a comfortable standard of living without being extravagant, but you must be realistic. Although it is tempting to cut expenditure to the bone, what is just about manageable with some degree of difficulty by the end of the first year will be unbearably restrictive by the end of the fourth. For example, if you need to budget appropriately for petrol to get to work, don’t slash your budget and force yourself to travel to work on a bicycle if it’s unmanageable for you.
Don’t forget, debt payments are not included as your surplus income will go towards paying those.
Step 4–Start reading up about moneysaving and budgeting
While your IP drafts a payment proposal and negotiates with your creditors, it would be a good time to start finding websites and information about how to manage the budget you will be living on. You may never have had to live to a budget before so it’s crucial that you do your homework and prepare yourself for a new life without credit. You may have to learn how to cook from scratch, shop carefully for deals and be able to spot when something is a bargain…and most importantly when it is not! All of this takes time so the sooner you start the better
Step 5 – IVA approved and awarded
Once your creditors have agreed to your proposal, your IP will start putting into place everything you need to begin your payment plan. You will have a new basic bank account opened and a regular payment set up to your IP. Any assets that need to be sold will be at this point. You should prepare yourself for the possibility of releasing some equity in your property if there is enough.
Step 6 – You’re up and running
Everything is in place when your next salary payment hits your bank account. Your payment comes out, goes to your IP who distributes it to your creditors. The money that is left is yours to budget across the month to live on. No more creditors ringing. No more worrying about how to keep up with your payments. It’s all done automatically. All you have to do is keep on top of your spending and stick to your budget. It will take commitment and perseverance, but it can be done.
Step 7 – Debt free!
After 60 months of payments and sticking to a budget, you’re now a lean, mean debt-free machine. Your future stretches ahead of you and you can do anything you want because you are no longer tied down to payment plans and creditors. Your IP will sort out the final paperwork, tie up all the loose ends and issue you with discharge certificate. Then all your salary and income is yours.
Now go out and celebrate (but don’t blow your budget!)