Can I set up an IVA without an insolvency practitioner?
If you want to set up an IVA, you'll need to employ the services of an insolvency practitioner. Once you've done this, they'll act as your representative and handle negotiations between you and your lenders over the terms of your IVA. Insolvency practitioners must complete a series of qualifications before they're fully licensed, and generally come from a background in either law or accountancy.
Finding the right insolvency practitioner
There are a couple of ways to go about finding an insolvency practitioner. One is to visit the Insolvency Service website, which lists licensed practitioners. Alternatively, you can get in touch with your local court and ask for the contact details of your local Official Receiver, who may be able to advise you on an appropriate candidate.
Your first consultation
Before deciding whether an IVA is right for you, it's a good idea to have a consultation with an insolvency practitioner. This can happen over the phone or in person, depending on the firm and your own preference. After this meeting, you should be in a much better position to decide whether you want to go ahead with setting up an IVA.
Your IP is legally required to present you with alternatives to an IVA and to make sure you understand the risks associated with each of those potential paths.
Documents to take to your first meeting
Your insolvency practitioner will tell you exactly what to prepare and bring to your first consultation, but you should generally expect to provide:
Proof of income, such as recent payslips or benefit statements
Bank statements covering the last few months
A full list of your debts and creditors, including account numbers and balances
Details of your household income and essential outgoings
Proof of identity and address
Details of any assets you own, such as property or vehicles
It's important to bring everything your IP asks for, as they need complete information to make an informed judgement on whether an IVA is suitable for your situation.
Be honest with your insolvency practitioner
It's vital that you're completely open with your insolvency practitioner about your financial situation. Being upfront allows them to help you to the best of their ability and makes the whole process easier for everyone involved.
If you're not truthful with them, they may set up an IVA that isn't appropriate to your needs, which could mean you're unable to afford the repayments. In the worst case, this could lead to your IVA collapsing, and potentially to bankruptcy or worsening debt problems.
It's also illegal to lie to your insolvency practitioner or withhold information from them. If you're caught doing this, you could face serious consequences, ranging from a fine to a custodial sentence.
Insolvency practitioner fees
Your insolvency practitioner will charge a fee, and the amount quoted varies from firm to firm. It's worth asking around and getting a number of different quotes before signing up with any particular company.
IPs will normally charge a set-up fee that covers the cost of organising your IVA, plus a monthly rate that covers the cost of managing it for its duration. Some IPs also take a portion of each monthly payment as their fee, though this isn't always the case. Look out for firms offering low-cost opening consultations and lower monthly charges, so more of your income can go towards actually paying off your debt.
How does an insolvency practitioner manage your IVA?
Dealing with creditors
Once the majority of your creditors (or those to whom you owe 75% of your relevant debt) have agreed to the IVA, it becomes official. From that point on, your creditors are no longer allowed to contact you or chase you directly for repayments; all communication with them becomes your IP's responsibility. If your creditors continue to contact you regardless, get in touch with your IP straight away so they can resolve it.
Managing payments
An IVA involves a reduced payment plan over an extended term to help you get out of otherwise unmanageable debt. Your IP will help you work out a monthly payment plan when your IVA is set up. Each month, you pay the agreed amount to your IP, who then distributes it among your creditors. Some IPs take a portion of each monthly payment as their fee, though this isn't always the case.
Annual reviews
Your IP will review your situation and the progress of your IVA every year to make sure everything is on track. This involves a careful look at your finances, and you'll generally need to provide documents like payslips to confirm you haven't failed to report any increase in earnings or other changes relevant to your IVA.
If you're found to have withheld relevant information, your IP may forcibly terminate your IVA. It's important to remain fully transparent about your financial situation throughout.
What if my situation changes during my IVA?
If your financial situation changes for better or worse during your IVA, you need to get in touch with your IP to let them know.
If your income increases, you may be required to adjust your payment plan accordingly. Most IVAs include a windfall clause, meaning that if you come into any unexpected cash, such as an inheritance or a work bonus, you'll likely be required to put some or all of it towards your debt repayments.
If you find yourself unable to keep up payments at the agreed rate, for any reason, you may be able to alter your plan instead of letting the IVA collapse.
Cancelling your IVA
Your insolvency practitioner is also responsible for cancelling your IVA if you choose to do so. You should think carefully about this decision and discuss it with your IP beforehand, so you're fully clear on the potential repercussions cancelling an IVA could have on your financial life.