How does the IVA process work?
The IVA process can be broken down into six stages. It usually takes about six weeks from start to finish, although this often depends on how quickly you can send the necessary supporting evidence to your advisor.
- Make sure an IVA is the most appropriate solution for your financial circumstances by speaking to an impartial advisor. The advisor should examine your income, expenditure, assets and debts in detail in order to calculate how much you can realistically afford to offer your creditors each month (see how much will I have to pay into my IVA) and determine whether your creditors are likely to approve your IVA (see who can enter into an IVA). The advisor should also explain all of your other options to you, such as Bankruptcy, at this point.
- If an IVA is appropriate for your circumstances then a Statement of Affairs is drafted based on the information you’ve already provided. The Statement of Affairs is the consolidated view of your current financial circumstances (assets and liabilities) and forms the basis of your IVA proposal. The proposal (which is usually drawn up by an Insolvency Practitioner acting as Nominee) will also contain creditor details as well as a breakdown of your income and expenditure and any supporting evidence that you may be required to provide (pay slips, bank statements etc). At this stage, your Nominee may also apply for an Interim Order, which is a legal injunction preventing your creditors from taking further action against you until your IVA proposal has been considered.
- Assuming that you’re happy with the proposal, it is then distributed to your creditors as well as the local county court and the Insolvency Service. The proposal document contains a proposed date (not earlier than 14 days after the distribution of the proposal) on which your IVA application will be considered; this is known as the Meeting of Creditors (in practice, most creditors use voting agents to act on their behalf). Modifications (changes) to your proposal can be requested at the meeting, although in practice this will usually happen in the days and weeks prior to the meeting taking place. If your creditors require more time to consider your proposal or require more information then your meeting can be adjourned.
- At the meeting, your creditors will vote on whether to accept or reject your proposal. 75% of the votes (by value of debt) must be in favour of the proposal for it to be approved. If this happens, all of your unsecured creditors, whether they voted yes, no or didn’t vote at all, are legally obliged to abide by the terms of the IVA agreement.
- Once approved, all the relevant parties are informed and a Supervisor is appointed (usually this is the same Insolvency Practitioner that acted as Nominee) to monitor monthly payments and make sure you are abiding by the terms of the IVA.
- As long as you continue to make payments (see what happens if I don’t keep up payments on my IVA) for the agreed length of time (typically five years), you will be discharged from your legal liabilities on completion of your IVA.
You can read more about the IVA process and whether they are suitable for your situation in our IVA section.
Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including IVAs. If you need to talk to someone about debt, please call the charity’s helpline on 0800 043 40 50 to speak to an adviser.