How to Apply For an IVA
If you have financial difficulties and cannot meet repayments, you may be tempted to apply for an IVA. However, you must be aware that your creditors may refuse to accept an IVA proposal and they will start debt recovery action, adding additional costs and interest to the outstanding balance. Furthermore, an IVA has a negative impact on your credit rating. It will stay on your file for 6 years and may affect your ability to obtain new credit or a mortgage.
An IVA works by consolidating your debts into one monthly payment, with each payment equal to a fraction of the outstanding balance. You can choose to pay in a lump sum to start the process, or you can choose to increase your monthly payments after your financial situation has improved. The process of applying for an IVA involves a detailed review of your financial situation. This includes your employment status, your debts, and your creditors. Your monthly expenses are also evaluated. Once your monthly budget is determined, you may be able to make a lump sum payment and avoid any further creditor contact.
A bank account is also required to be opened by someone who has entered into an IVA. A bank account with no credit facilities or overdraft is required. However, some banks do not permit people to operate their bank accounts while in an IVA. Therefore, it is essential to speak to your IP and seek advice on the best course of action.
You must have a clear idea about what the monthly payment will be before you apply for an IVA. The payment amount will need to be affordable and not put you in a financial hardship. Once you have decided on the amount, your IP will discuss the details with your creditors and organise a meeting. You may need to meet them in person, in an office setting, or through a video conference.
Your IP will take into account all the properties that you own. If your house has a mortgage or you have already paid off your mortgage, the IP will calculate how much equity you have and how you will use it to pay back your debts. In some cases, you may be required to update the balance of your secured loan or mortgage as part of the IVA process.
Once you have applied for an IVA, the IP will put together a proposal for your creditors. He will use the details of your income and expenditure to make a proposal. He will then contact your creditors and ask them to vote on the proposal. The creditors will then have 14 days to decide if they agree to your proposal. It is essential to have at least 75% of the creditors agree to your proposed repayment plan.
As with any IVA, you will need to provide evidence to back up your claims. The more evidence you provide, the stronger your case will be. In addition, you must be honest with your IP. If you give false or misleading information, it will harm the IVA process and lead to a failure in your application.
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