Government IVA – What, How & Why & Do I Qualify?

“What is a government IVA?” “Do I Qualify for a government-supported IVA?” “How do I get a government backed IVA to help with my debts?” Are common questions being asked by individuals facing financial difficulties looking into different debt arrangements and debt settlement programs.

On this page we will explain and add context to these questions to inform you of the meaning of this as a debt solution (i.e “what it is”), how it works, why would you want to get one and do you qualify for one.

Firstly it’s as follows:

What Is Meant By The Term “Government IVA”?

Basically, an IVA is not something that is generally administered by the government, however it is “supported” by the government due to the insolvency act 1986 where the IVA (otherwise known as the “individual voluntary arrangement”, also supported by the financial conduct authority) was introduced as an alternative to bankruptcy to help people in substantial debt.

So, the IVA “IS” supported by UK law and the British government but it is not administered by them (this doesn’t make it any less helpful to people in debt however).

For those wondering what the insolvency act (1986) is it is basically an act of parliament that provides a legal platform for personal and corporate level insolvency in the United Kingdom, so you can be sure if you decide to enter into an IVA (and if you qualify) this is a solid, legally binding arrangement that is to be taken very seriously but also has the power to write off large amounts of debt and also help individuals avoid bankruptcy in the process.

So, How Does A Government IVA Work?

When an individual makes contact with a company to enquire about which debt solution would be appropriate for them (we offer a free debt assessment) it may be presented to you as an option to be put forward for an IVA (alternatively you could ask about being put forward for an IVA during your initial assessment) There are also other debt solutions such as the debt management plan, which is a more informal debt relief system.with less powers but les regulations than the IVA.

The steps to setting up an IVA (4 steps):Here we describe in 4 easy to understand steps of the IVA Process (If you live in Scotland, the Scottish versions of IVA’s are known as trust deeds feel free to get in touch with us for trust deeds or other debt advice.)

Step 1: The Interim Orders This is the stage where if creditors’ are attempting court proceedings or legal action against you, it may be a good idea to apply for what is known as an “interim order” which is an order that can give you more time to deal with the existing debts, which would be entirely appropriate in the case of a potential IVA. (It can stop your creditors from pursuing you in the courts in the short term).

Your insolvency practitioner may also recommend or initiate this to protect from legal action if any debt pursuit proceedings have already reached that stage, this prevents any unsecured creditors from initiating county court action or harassing you for debt repayment.

Step 2: Evaluation Of Your Financial Circumstances

Once legal protections have been obtained from any creditors (as necessary), the insolvency practitioner will go through all of your finances with you, this is an essential step to evaluating if an IVA is suitable for you as a debt solution.

They will need access to debt information relating to income and outgoings, current debts, creditors’, the length of debt, any documentation that could be relevant to these matters and details of the amount of debt, it is at this stage that all income and expenses are calculated to work out just how much trouble you are in financially to assess if an IVA is the best option.If it is decided by the insolvency practitioner that an IVA could be helpful then the next stage begins.

Step 3: Building the IVA proposal to submit to the creditors.

This is the stage where the Insolvency Practitioner (generally informed and regulated by the insolvency practitioners association)formulates a case based on the Evaluation of your personal circumstances to present a new plan to creditors’ to deal with the debt liability based on what is affordable but also what will enable you to have a good standard of living with normal provisions for day to day life.This is a pitch that is built and formulated by the insolvency practitioner that is presented to both the courts and the creditors for approval, and it generally requires a 75% majority acceptance in order for the IVA to be accepted by the creditors.

This proposal will ask for an extension on the existing loan liabilities and a reduction in the monthly repayments in order to make the debts more manageable and affordable for you.Included within this will be a rationale as to why an IVA would be a better option for all parties than bankruptcy (also important to note, many creditors’ generally agree to IVA’s in a lot of cases because it means they will get a portion of the debt back as opposed to nothing, which would likely be the case with bankruptcy) better to have some debt repaid than none.

Step 4 – Presenting this proposal to creditors & the courts’

This is the stage where once the proposal is completely ready it is presented for approval to both creditors’ and the courts. If the IVA is agreed and approved (as it has every chance to be in most cases) then the arrangement will go ahead and the pitch will have been a success meaning the arrangement can commence.Note: It is very important that an IVA is taken seriously by all parties if undertaken, it has many benefits but is a legally binding financial arrangement that has the capacity to write of large amounts of debt.

Why Would I Want An IVA?

There are a range of benefits to having an IVA for someone who has a large amount of debt and unmanageable repayments, here are 5 of the main benefits.

1) An IVA can write off generally up to around 85% of debt – which for people with large debts can easily be an enormous sum of money (and IVA’s are legally binding, government supported solutions), you can include all unsecured debt into an IVA including credit card debt, personal loan debt, store card debt, and many other types.

.2) An IVA can and will halt hassle from creditors’, bailiffs, and other people that may pursue the repayment of a debt (also offers protection from existing legal pursuit from creditors’ and debt recovery agents).

3) You will receive an appointed individual who will be the mediator between yourself and your creditors’ they will distribute your monthly payments into your repayment plan (which will be at a new, affordable rate) to your creditors’ (the people you owe money to) When managing an IVA it is the insolvency practitioner who handles these responsibilities.

4) In many cases all interest and charges will be frozen on the debts, meaning the liability in most cases will not grow over time whilst you are slowly repaying the debts.

5) The IVA will last (in most cases) a maximum of 5 years with any debts outstanding after that period generally classed as settled and no longer due.

Will I Qualify For An IVA?

There are some key criteria for qualification for an IVA

1) You must have debts over £5000) You must have debts from at least 2 different creditors’

These are the two basic qualification criteria.You must also gain (at the proposal stage) a 75% rate of approval from the creditors’ (this is generally the responsibility of the insolvency practitioner to facilitate with the assessment of your circumstances and the proposal and pitch).

If you would like to begin the process of getting an IVA you can get in touch with us to request a free debt assessment or use our free debt test to enable us to assess your situation and give feedback on ways you can be helped in your current situation.Perceived Disadvantages Of An IVA

1) You must give total visibility of your personal circumstances to the insolvency practitioner, with the IVA being one of the formal solutions to get rid of bad debt, you are expected to work closely with the IP.

2) If there are any windfalls or changes to circumstances you should declare them to your insolvency practitioner. (should your circumstances change, you may be asked to pass some of the windfall to your creditors to go towards iva payments).

3) You DO need the approval of the majority of creditors (which may or may not be a problem but often is not), but this may give cause for a revision of the proposal, however you would be protected by the interim order in the meantime which would halt legal action against you (including county court action).

How Long Does It Take To Set Up An IVA?

An IVA in many cases can be set up in a time frame of approximately 4-6 weeks, in some cases if there are points of disagreement this may slow things down, however often creditors’ are more co-operative than many would expect, mainly due to them wanting an arrangement that works for everyone, however there are no guarantees on the behavior of individual creditors’ during the course of the IVA process.

Can the timeframe of an IVA change whilst the IVA is in process Sometimes, in certain cases an IVA may be extended to 6 years, this is generally to protect assets and would come up as necessary.

Also IVA’s can be completed sooner if there is scope for there to be a “lump sum” contribution paid into the IVA that is negotiated into the agreement in such a way where no further repayments would be due to creditors’.If you are struggling under debt feel free to contact us for a free debt assessment to find out what options may be available for you to handle your debt, there are trained advisers’ with experience in handling debt available to help.

You can also get a joint iva if you are in a couple with unsecured debt, you can use a joint IVA for joint debts.

Are IVA’s Government Backed As A Debt Solution?

The Individual Voluntary Arrangement (IVA) as a debt solution was established and administered by the Insolvency Act of 1986, and is presented to the creditors through an insolvency practitioner (the intermediary), as a formal repayment proposal.The Insolvency Act 1986 is an act of parliament and thus as a debt solution the IVA is recognized and government supported and legally binding (provided the terms are kept to by the person in debt).

Will The IVA Affect My Credit? Affect My Credit File?

Yes but your credit file will be a effected heavily in any case if you are to miss payments to your creditors’, once you arein a better position financially partly due to the IVA you will then be able to rebuild your credit rating.

There are advantages and disadvantages to the IVA however the benefits tend to outweigh the non benefits.

This act of 1986 enables the IVA to be a system of debt settlement whereby the amount of debt repayable each month is heavily dependent on the amount of disposable income, the individual has and their individual circumstances from the moment the iva is written and approved.

What Happens IVA I Don’t Qualify For A Government Supported IVA?

For your unsecured debts (credit card, payday loans, unsecured loans, and other personal debt) there is the option of a debt management plan, and debt management plans are less formal debt relief programs with a range of advantages and disadvantages which can help in similar ways to the more formal solutions, debt management is supported by the financial conduct authority however the IVA is more powerful.

For more information on individual voluntary arrangements or other debt solutions get in touch for a free debt assessment or use our free debt test.

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