Individual Voluntary Arrangement (IVA)

February 2009

An Individual Voluntary Arrangement, better known as an IVA, is a contractual agreement between an individual and his/her creditors, usually to accept a reduced level of repayment over a set timescale, typically 60 months (5 years).

In order to propose an IVA, you must be insolvent, that is you are unable to repay your debts when the debt repayments fall due. IVAs are generally used as an alternative to bankruptcy - in order to protect your assets, to offer a higher return to creditors and to avoid the unnecessary publicity associated with bankruptcy, and in some instances can provide a more certain outcome than a Debt Management Plan (DMP).

To be eligible for an IVA you will need to have at least three (3) unsecured creditors, and aggregate unsecured debts of at least £12,000. Generally, a disposable income figure of more than £120 is required. We will work within these boundaries in order to make the solution effective for both you and your creditors.

The terms of your proposal to creditors may be very flexible, but creditors will expect their prospects of recovery to be at least as good as in a bankruptcy and you will have to make some lifestyle changes as you adapt to a more structured household budget. You will need to engage the services of a Licensed Insolvency Practitioner ("IP") to act for you, who is initially known as your "Nominee", and if the creditors accept your proposal the IP then becomes the "Supervisor" of the arrangement. EuroDebt's IP has an excellent record, with 98% of proposals being accepted at the creditor meeting and over 92% of IVAs delivering the expected return to creditors.

Your appointed IP will take the Client Financial Planner from your meeting with the EuroDebt Debt Advisor and assist you to formulate your proposals to creditors, which will be circulated prior to a convened meeting of creditors where a vote will be taken as to whether to accept, modify or reject the proposed IVA. In order to be accepted, a majority vote of 75% (by value of debt) of those creditors present will need to be achieved. Creditors may put forward changes to the proposal, but they cannot impose them on you as you decide whether to accept them or not. You will not need to attend your creditors meeting in person, but your IP will expect you to be available during that day by the telephone in order that they can act upon your instructions.

Summary of an IVA Proposal

Employed tenant, married (no dependents) in their late thirties with total unescured debts of £24,927 with 7 creditors and liabilities exceed assets.
Monthly contributions (60 months @ £385 = disposable income) £23,100 with 7 creditors and liabilities exceed assets.
In this case, EuroDebt would charge an Administration Fee of £385 under an IVA Support Agreement, including further home visits, as required, to gather all supporting paperwork for the IVA Proposal to reduce delays and to increase the likelihood of acceptance without modification
Insolvency Practitioner fees are taken from the monthly contribution of £385
Less:
	Nominee Fee	£2,000
	Supervisor's Fee over IVA Term	£3,465
	Irrecoverable VAT	£1,093
	Costs	£350
Total Costs					£6,908
Net funds available to 7 unsecured creditors					£16,192
Dividend to unsecured creditors		64 pence in the pound(£)
Dividend in Bankruptcy					Nil

Once the Supervisor is in office, his/her job is to ensure that you fulfil your responsibilities under the IVA and that creditors get repaid at the earliest opportunity. The costs of the IVA are borne from the monies you are intending to introduce into the arrangement. We will not ask you to pay anything in advance. Regular reviews of your ongoing financial situation will be carried out at least once per year, and the Supervisor will report their progress to you at this time. Providing that you comply in full with the terms of your agreement, you will eventually be released from the remaining creditor balances and be served with a Certificate of Completion by way of evidence.

Conclusion

Having an IVA accepted gives you the opportunity to avoid bankruptcy whilst repaying your creditors to the best of your ability over a realistic timescale. They give certainty to a previously uncertain future, and assist with financial rehabilitation leading to an eventual repaired credit rating. Your IVA is public record information and will remain on your credit file for 72 months from the start of the IVA. You may still find it difficult to obtain credit or a mortgage after completion.

All debt solutions will be discussed at your meeting with your EuroDebt Debt Advisor and your personal preferences will be a priority, subject to eligibility. EuroDebt's appointed IP will comply with the IVA Protocol established in February 2008. In our experience, this will significantly increase the likelihood of your proposal being accepted without revisions at the creditors meeting and the long-term sustainability of your IVA.

You will have the opportunity of discussing your IVA proposal with our IVA Support Team within 2 business days of your Client Financial Planner being processed by EuroDebt Head Office. There are no upfront fees associated with your IVA submission. Should you elect to switch to an alternate Debt Solution (e.g. a Debt Management Plan, Bankruptcy) at this point then any fees applicable will be confirmed to you in writing.

To arrange a no obligation meeting with a EuroDebt Regional Advisor call 0800 2 98 97 98 or complete the Contact Us form and add "IVA" in the comments field.

Important points to remember:

• An IVA is entered on a public register.
• Whilst on an IVA and for a year after completing it your credit rating will be affected - an IVA may last 5 years but the effect on your credit rating will last 6 years and potentially longer if the term of your IVA is extended.
• If your IVA fails, you may be made bankrupt and you remain liable for the balance of your debt and any Insolvency Practitioner fees and costs already incurred.
• Whilst we ask your creditors for 30 days breathing space to set-up your IVA Proposal after we are appointed as your debt manager, your accounts may go into further arrears until the Insolvency Practitioner starts disbursing payments to your unsecured creditors.
• Remember, you are not obliged to enter a debt solution with EuroDebt and you are able to cancel at any point whilst your IVA Proposal is being prepared. We offer a seven day cooling off period from the point of signing your IVA Support Agreement.

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