What’s the legal position of an IVA?

IVA’s were first introduced by the Insolvency Act 1986 and were initially intended to assist business people to continue trading.  However, since then, they’ve assisted thousands of individuals to get out of debt. An IVA is a 5-year debt solution unlike the Scottish Trust Deed which is only 4 years.

In this article we’ll take a look at the legal position of an IVA and what it might mean for you.

What is the Government IVA solution?

The Government IVA solution provides several legally binding benefits to those people who find themselves in debt and having to consider an IVA.  These are as follows:

• It’s a private agreement.  So, unlike bankruptcy, details of your IVA won’t appear in the London Gazette nor will it appear anywhere other the Insolvency Register (which is unlikely to be checked by your employer, family or friends).
• It provides legal protection from creditor actions.  This means that, once you’ve entered into your IVA, your creditors can no longer contact you by telephone, correspondence or home visits etc.  Most debtors find this offers great peace of mind and helps to alleviate the element of stress associated with being in debt.
• There’s a fixed repayment term.  Most IVA’s will only last 4 or 5 years – so finally, you’ll be able to see an end to your debt after a fixed period of time.
• Any remaining debt will be written off.  At the end of your IVA any remaining debt will simply be written off by your creditors and best of all, they won’t be allowed to pursue you for any remaining balance.
• An IVA arrangement is based on affordability.  Once you’ve chosen your insolvency practitioner, he or she will ask to see full details of your income and outgoings so that a reasonable amount can be proposed to your creditor.  This set monthly amount will also include your practitioner’s fees, so it really is a case of simply consolidating all your debts into just one monthly repayment.
• Interest and charges will be frozen.  Once your IVA has been accepted and entered into then your creditors won’t be able to add any additional charges to the outstanding amount (such as late payment fees, interest charges and administration fees etc.)
• Your assets will be protected.  Unlike bankruptcy, an IVA means that certain assets (such as any property you might own) will be fully protected and you won’t be required to sell them.  You may, however, be required to re-mortgage any property you own during the last year of your IVA if the level of equity in it exceeds £5,000.00.

Who can enter into an IVA?

Many individuals are entitled to enter into an IVA.  However, there are certain professions which are prohibited from doing so, such as limited company directors, solicitors, accountants, police officers and armed service personnel.  If you’re in any doubt as to whether your employment might prohibit you from entering into an IVA, then it’s imperative you consult your insolvency practitioner and/or provide a copy of your employment so that this can be checked in more detail. There is also the chance to enter a joint scheme in IVA (husband and wife). And this allows you to solve your debt issues as one entity, unlike what is often experienced in Trust Deed Scotland, where such is not permitted; instead, it would have to be two separate Trust Deeds (or one Trust Deed and another solution).