How Do Insolvency Practitioners Manage IVAs?

An individual voluntary arrangement (IVA) is a formal agreement that allows an individual’s personal debts to be reorganised with their creditors.

If you’re struggling to pay your bills, an IVA is an excellent way to re-manage debts, but it’s an agreement that must be overseen by a licensed IVA insolvency practitioner.

In this article, the team at Irwin Insolvency explains how insolvency practitioners manage IVAs, and how they can help you escape debt and reorganise your finances.

What Is an IVA?

An individual voluntary arrangement, commonly abbreviated as ‘IVA’, is a practical insolvency tool designed to help individuals reorganise their debts and avoid having to declare bankruptcy

An IVA must be organised by a licensed IVA insolvency practitioner and it amounts to a formal, legal agreement between a debtor and their creditors. The goal of an IVA is to reorganise debts, often by consolidating multiple debts, reducing interest rates and organising repayment plans based on what the debtor is able to afford.

Importantly, once an IVA has been agreed upon, creditors can no longer chase you for outstanding debts and payments. This buys valuable time for you to reorganise your finances, and is an effective way to escape insolvency. An IVA usually lasts for 12 months, although this may vary on a case-by-case basis, and it may be renewed or reconsidered at the end of this period.

An IVA insolvency practitioner can advise whether an IVA is the best option for you. An IVA is only applicable for individuals not businesses, and it’s best suited for people with multiple creditors and large amounts of personal debt.

What Does an IVA Insolvency Practitioner Do?

An IVA is a legally binding agreement between an individual and their creditors, which means that formal legal contracts must be drawn up and signed. It’s a process that has to be organised and administered by a licensed and qualified IVA insolvency practitioner, who will perform a range of duties and tasks throughout the procedure.

An IVA insolvency practitioner will communicate directly with creditors on your behalf, meaning you no longer need to interact with your creditors. This is advantageous if you have multiple creditors, or if creditors are being aggressive when pursuing you for outstanding payments.

The IVA insolvency practitioner will negotiate a financial agreement with your creditors on your behalf. To do this, they will need to look over your accounts, assets and income, in addition to your debts and liabilities. The IVA insolvency practitioner will calculate how much you can reasonably be expected to pay back over a set number of months or years. The creditors may not be expecting to receive the full amount back, and the IVA insolvency practitioner will negotiate terms that will assist everyone in the long run.

As part of the agreement, the IVA insolvency practitioner may recommend that loans be consolidated, which will make payments more manageable for you and potentially reduce interest rates and the total amount owed.

Once the IVA insolvency practitioner has agreed the exact terms of the arrangement with your creditors, the creditors need to approve the IVA by a 75 per cent majority. If they don’t, then the IVA insolvency practitioner will continue to negotiate or may suggest other insolvency tools.

Throughout the process, your IVA insolvency practitioner will ensure that the law is followed and all financial regulations are met. They will also handle payments and communications going forward, collecting your payments before distributing them to your creditors.

Once you’ve chosen a professional IVA insolvency practitioner to work with, there are a number of steps they’ll take to organise the process. These include:

  1. Assessing your personal financial situation.
  2. Communicating with creditors to establish monthly repayment plans based on your income
  3. Reviewing the terms of an IVA, and ensuring all legal requirements are met
  4. Drawing up legal documents that make the agreement legally binding
  5. Handling payments between you and your creditors
  6. Regularly reviewing the IVA

It should be noted that an IVA is flexible. This means that the terms of your repayment plan may change over the course of several years. If your income improves, for example, you may be required to pay back more to your creditors on a monthly basis. If you are struggling to repay them, your IVA can also be reassessed.

The IVA insolvency practitioner will carry out regular reviews of your financial situation and of the IVA, and they will make recommendations based on their findings. If an IVA needs to be cancelled or changed, the IVA insolvency practitioner will oversee this process.

What Are the Alternatives to an IVA?

IVA insolvency practitioners are licensed to recommend and oversee a wide range of insolvency tools. In fact, while the IVA is an excellent tool for individuals, it may not always be the best option for your personal circumstances.

If an IVA insolvency practitioner believes there is a more appropriate option available, then they will recommend this. For example, if you only have low levels of debt and few creditors, it may be more effective to arrange an informal agreement or to take out a debt relief order or debt consolidation loans.

In certain circumstances, an IVA may not be enough of an effective tool to help you escape debt. If you owe large sums of money and have few assets to lose, then declaring bankruptcy may be the best thing to do. If you’re in financial difficulty, Irwin Insolvency can advise on the best insolvency tools for your situation.

Contact Irwin Insolvency Today for Your Free Consultation

If you’re struggling to pay bills or if creditors are chasing you for outstanding payments, an IVA is an excellent way to reorganise your debts and avoid bankruptcy.

Irwin Insolvency has an expert team of licensed IVA insolvency practitioners ready to assist you. We can provide the advice, skills and experience that ensures you get the best deal from creditors.

Contact Irwin Insolvency today to find out how we can help you or to book your free consultation.

Contact Irwin Insolvency today for your free consultation

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0800 009 3173

About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.