Last updated: 14/11/2023 | Estimated Reading Time: 3 minutes
Setting up an IVA
If you want to set up an individual voluntary arrangement, there are certain steps that you must take in order to do so. Following these steps correctly will allow you to work out if an IVA is the right option for you. If you successfully set up an individual voluntary arrangement, you will be able to lengthen your loan's term and also lower the level of the monthly repayments that you make.
In This Guide:
- Things to consider before you set up an IVA
- Step 1 - interim orders
- Step 2 - financial evaluation
- Step 3 - formulating a proposal
- Step 4 - pitching to your creditors
Things to consider before you set up an IVA
Before you jump into the decision of taking out an individual voluntary arrangement, you should think long and hard about whether or not it is the right option for you. When you first meet with an insolvency practitioner you should quiz them about possible alternatives that may be better suited to your individual circumstances. It is also important to find out what potential risks and pitfalls are associated with organising an IVA. There are also employers who do not permit their employees to take out IVAs.
Step 1 - interim orders
If you are in a position where your lenders may be preparing to take legal action against you, you should consider applying for what is known as an interim order. This can be a very useful tool in stopping your creditors being able to pursue you through the courts in the short term. There is a chance that your insolvency practitioner will suggest an application for one immediately, if this is the case you should decide whether or not you are eligible to make one.
Another option your insolvency practitioner may decide on is going directly to the courts and asking them to adjourn any action against you until you have learnt the outcome of your IVA application.
Step 2 - financial evaluation
Once you are protected from legal action by your creditors, you need to go through all of your finances with your insolvency practitioner. They will ask you for a comprehensive list of all of your financial documentation. This list will include bank statements, pay cheque information and data about all of your existing loans. This may seem like a large list of things to let them look through but it serves a purpose; to allow them to work out exactly how much financial difficulty you are in. You should also consider putting together information about your expenses, including everything from rent, energy bills and travel expenses. This would then take into account any disposable income that you may be able to put towards your IVA payments.
Step 3 - formulating a proposal
Once you have gone through your entire financial situation with your insolvency practitioner, it will then be time to start working on a proposal to pitch to your creditors and the courts. This proposal will ask for an extension to your loan and also a reduction in your monthly repayments.
In addition to this your insolvency practitioner will compile a report for the courts that will describe their view on whether or not your IVA should be accepted. Your financial information will be included in this report with anything from your salary, assets etc. They will also outline why they believe that an IVA is more relevant to your situation and more appealing to your creditors than simply declaring you bankrupt.
Step 4 - pitching to your creditors
Once all of the above steps have been completed, you will then have to propose your idea to the lenders that you have outstanding debts with. All of your creditors will attend the same pitch and so will your insolvency practitioner - it is advisable that you go to this meeting and make a case for yourself.
Once you have given them your pitch, your creditors will vote on whether or not to accept your proposal. In order to have your proposal accepted, you need to gain 75% support from your creditors. If you achieve this, your IVA will start immediately and all of your lenders will be bound to its terms and conditions.