IVA Process

Sometimes, understanding what actually happens during an IVA can be quite difficult.

You will probably have enough on your mind with your debts, and won’t even stop to think about the actual process involved on an IVA – so here’s a step-by-step guide to help you understand what will happen before, during and after the agreement.

Step one – speak to a professional debt adviser

Before you enter an IVA, you should contact a professional debt adviser and speak to them about your current financial situation. Depending on your level of debt (amongst other things), you may find that that an alternative debt solution would be more appropriate for your circumstances.

However, if your debt adviser believes that an IVA is the most suitable solution for you – and you decide to enter one – you will work with an Insolvency Practitioner (IP) to come up with a proposal to give to your creditors.

Known as an IVA Proposal, this will include details regarding your current financial situation and how much each of your lenders is likely to receive if the IVA was to begin.

Step two – your creditors will review your IVA

Your creditors will each be sent a copy of your IVA proposal, and will be given the opportunity – after reviewing it – to vote for or against it.

For the IVA to go ahead, voting creditors accounting for at least 75% of your total debt must agree to the terms set out in your proposal.

Step three – the IVA will begin

If enough of your creditors agree, the IVA will begin and all recovery action will be frozen. You will begin making payments to your IP, who will subsequently share money out amongst your creditors as agreed. In most cases, you will make these payments for 5 years – however, this may vary depending on the terms of the IVA, and whether you miss any payments throughout its duration.

Because an IVA is a formal, legally binding debt solution, once it has started, your creditors cannot change the terms of the agreement, or back out of it altogether – unless you fail to stick to the terms.

Step four – regularly review your progress

Both you and your creditors have certain obligations under the terms of the IVA and your IP is responsible for supervising the arrangement to make sure that these are met. This will include regularly reviewing your income and expenditure and reporting on the progress of your IVA to you and your creditors. They will need to provide certain information at regular intervals throughout the term, copy pay slips for example.

Step five – you may be required to release equity

If you are a homeowner, you may be required to release some of the equity in your home during the 54th month of the agreement. This money will be used to repay more of your debt.

Step six – the IVA comes to a successful close after 60 months

After making your final payment (usually in the 60th month), the IVA will come to a successful conclusion, and any remaining unsecured debt will be written off. You will be legally debt-free at this point, but the IVA will stay on your credit report for another year, which will restrict access to further credit and/or make it more expensive to obtain.