Individual Voluntary Arrangement Manchester UK
Individual Voluntary Agreement service provider Manchester UK. Debt is a popular concept in the world spanning individuals, institutions and countries. Debtors everywhere are seeking some form of debt relief and although the world may never come to a point where everyone has a clean slate off debt, everyone ranging from individuals to larger corporations seeks to have a reasonable debt profile.
Getting into debt is a very easy concept – all that is needed is to have some amount borrowed (money or some valuable items that can be assessed monetarily) and a debt relationship has been set up. Three profiles by the action described above. The borrower now goes by the name debtor, the amount borrowed is called the debt and the person or entity borrowed from becomes the creditor. Of course, it is the belief that all who set up this relationship intend to pay up and clear the debt and allow things return to normal but this is not always the case for many factors.
Emergencies, unforeseen spending, seeing more opportunities for investment and the general need for more are some of the causes that come in one form or the other to drive one further into debt or keep a debt payment lingering for longer than initially expected. A sudden change in the financial fortunes of an entity can cause a predicted clear-debt estimated period to all of sudden seem unachievable. Life on the other hand doesn’t stand still during the period of your loan arrangement so the debtor may be in need of credit, which could include a person or organization finding ways to clear your debt profile or finding an individual or organization to ignore your debt profile and provide you more credit relief for the remaining mounting activities that come about from the world not pausing because of your initial borrowing move.
Sooner or later everyone who is in this relationship seeks to find a way out either because it’s getting to an unhealthy region or because it is now a huge obstruction in moving forward either as a huge gash on your credit rating or in form of court orders and litigators all over your case and your movements.
How are debts Handled?
The search for the perfect debt management scenario is in the quest for. There is no one size fits all solution. The best size possible to fit all is one that sees the debtor make adjustments to their current spending pattern if not the struggle would inevitably continue.
In handling debts, getting a credit loan is one of the ways that debtors seek to get some debt help. However, the quality of the loan you get is dependent on the state of your debt profile. So if you have a debt profile that is positive you will get some bailout that might have good terms of repayment to it and vice versa if your debt profile isn’t. Getting a bad credit loan is usually the case the odds are stacked against the borrower as a result of history. High-interest rates are charged due to low trust levels as a result of past records on repayment of loans. Creditors are engaging in the act of borrowing only in the hope that they won’t have the same response that the debtor’s track record reveals. So the debtor in this scenario represents a high risk and so the high interest is a reflection of the high risk, so the higher the risk posed by a debtor the higher the interest rate on the credit loan.
There is no loan scheme that goes by the name – “Bad Credit Loan” however these characteristics which are combined features from the lender and the borrower usually culminate in a bad credit loan. The credit loans could generally be either Secured (There is a collateral on the line as the backup for the creditor to regain their money there is a faulting on the agreed terms) and Unsecured (the absence of hard collateral just a signature and promise to pay).
Debt Management Plans
A Debt Management Plan is a relationship between a creditor and debtor that is being managed by a financial institution on the premise that the all the debts owed to the creditor would be paid by the debtor. A debtor after seeking advice would pay a set-up fee and subsequent running fees on each payment towards the closure of the debt during the duration of this agreement.
Other methods for clearing debts such as:
- Administration Orders – A solution that is sought when there is a court order against the debtor. This applies to debts within a certain range. In the United Kingdom, the amount of debt has to be below £5,000 to have an administrative order issued. This order ensures that all the creditors cannot take any legal action while payments are made to the courts who do the disbursement to the creditor(s).
- Debt Relief Orders – This also has a threshold of an amount owed and also has terms of consideration before it can be granted and ensures no legal action is faced from a creditor during this period and discharge from debts is usually possible within a year.
Another form of debt help is the IVA – Individual Voluntary Agreement and now that we have the basics covered we can get this solution.
Individual Voluntary Agreement
An Individual Voluntary Agreement is an agreement between a debtor and creditor that is set up by an Insolvency Practitioner that could see some part of the debt owed written off provided that the debtor sticks to the said agreement. During this agreement and keeping to the terms of the agreement, the creditor cannot change the terms of the agreement without the acceptance of the debtor who is represented by the Insolvency Practitioner. The IVA is one of the alternatives to declaring Bankruptcy. It is known as a Protected Trust Deed for those in Scotland.
The IVA would contain the agreed amount that is to be paid over a given period of time and also the said amount of debt owed that would be written off (if applicable) by the creditor provided the debtor in question meets up to the stipulated requirements.
Before rushing into this solution or any other debt help solution it is important to always seek professional advice. This is because there is a tendency for individuals and companies to display and whip up the merits of a particular solution and gloss over the demerits. Every debtor needs to assess their future and plans ahead and come to terms with the full pros and cons of a debt relief solution and not arrive at the future full of surprises as a result of only considering the present day merits of a particular solution as a result of an incomplete view of the merits and demerits of a particular solution.
Any debtor who has come to the full awareness that an IVA is a preferred route for debt help would then engage in some prelims.
Preliminary Preparations by a Debtor before an IVA
- Hire an Insolvency Practitioner (IP) – IPs are professionals with relevant qualifications that will be representatives during the process of setting up and settling the terms of the IVA. They could either be lawyers or accountants but they must be qualified in this regard. They help assess if the IVA application would be approved by the time you have all your reports and evidence together. They would run an assessment on your income and expenditure and come up with a reasonable offer for the creditors in question while working out a good deal to ensure that you keep on living – only the bare necessities would be given serious thought.
- Budget Creation – Life during an IVA is austere and it is important to make necessary projections. One of the merits of the IVA solution is that it gives the debtor the opportunity to have important necessities in consideration like – Rents, Bills for utilities and amenities, Food, Clothing, Toiletries, Travel, Educational Costs, the welfare of the debtor’s children, etc. During this process, lavish expenditure would be highlighted and subsequently cut back on or eliminated.
- Get The Relevant Paperwork Handy – The debtor in question may make the paperwork mentioned handy even before running by the Insolvency Practitioner. The paperwork would be required for the process to be filed and initiated, so the best bet is to start early.
- Payslips and/or Bank Statements from up to 3 previous months.
- Documents detailing the state of a mortgage if applicable.
- Documents detailing other forms of secured loans if applicable.
- Correspondence with creditors for verification of account and location information.
- Documents detailing rent payments and tenancy agreements.
- Financial statements as regarding vehicles that are owned.
- Documents on various insurances, assurances, and pensions held by the party in debt.
Now that the preliminaries are over the real get-down-to-the-business. The process could take at least 6 weeks to be complete, however, if preliminaries are done properly, then a faster processing time could be achieved.
The Rest of the IVA Process
- The Proposal Submission – The IP gets busy with drawing up a plan referred to as a Statement of Affairs that you discuss and agree on that would be the best route out of the state of debt. While the assessment and documentation gathering and verification is being carried out by the IP, it is in the best interest of the debtor to be transparent so as not to throw up difficulties in what is usually a straight-forward process when managed right. The Statement of Affairs is drawn up from this information. Once an agreement is made that the debtor agrees with then the IP goes ahead to make a submission to the creditors. Do note that this agreement submitted is inclusive of the payment for the service of the IP which would be factored into the payments that the creditors expect to receive from the debtor. So the debtor is free from making the payment to the IP as part of their austere budget. This is one of the merits of the IVA. The IP may also apply for an Interim Order in a court in the case creditors want to take further action before the Proposal is served or agreed.
- The Creditors Meeting – In the case of multiple creditors, there has to be a meeting where the powerbrokers on a successful proposal would be the creditors that are owed the most by a particular client looking for debt help. The creditors make an assessment on the claims and look at all the facts compiled together such as previous income and expenditure and also expected income and expenditure for the future. Then they respond.
- The Response – The response from the creditors are of two types and then the action of the debtor determines the next line of action:
- Approval – An approval is certainly the hope and if this is the result then the creditor is good to go and continue life in check of the terms of agreements. The approval happens if a 75% of the debt owed (meaning the creditors owed the most are the key players) votes in favor of the IVA. Once this happens all other parties from which unsecured loans were obtained from are bound by the terms of the IVA. Also, all interests on loans and credits prior to the IVA are frozen. However, expect an annual inquest into the state of finances of the individual by the creditors to ensure that the agreement is being kept to. There is also an assessment to see if the financial state of the individual has improved in some way, if yes – creditors may request for an increase in the payments.
- Modification – Here the creditor would ask based on their own assessment and view of things that the debtor should make adjustments to their expenditure profile for the future and cut-back on some points that they consider luxurious. This is the attempt to ensure that the debtor is committed to the cause of paying off the debt by the creditor. The action of the debtor is either rejection which would usually result in a rejection of the IVA from the creditors. The debtor could also ask for a modification and enter negotiation via the Insolvency Practitioner representing their interests for a compromise to be arrived at and the whole process goes all over again. This period of consideration for a modification is usually a 14-day window.
- Rejection – The creditors do not feel that this is an agreement that favors them in any way and is not interested in any discussion on the application.
- Wrap Up and Life Moving Forward – If the proposal is accepted, factored into the IVA might be a clause to see an increase in the amount paid per installment to the creditors if there is a rise in the income of the debtor. On the side of the debtor, there is also the possibility of revision if there is an unforeseen tightening of the financial condition on which the initial forecast of the IVA was made on. This revision is submitted by the IP and may or may not be approved or may bring all parties back to the negotiating table. The rule though is that revisions are not binding as long as there is no all-around agreement by all parties and as long as the requirements of the agreement are being maintained, creditors are restrained from chasing debtors. If there are any outstanding balances left at the successful completion of the IVA, they are written off. This figure could sometimes sum up to around 50% or 60% of the debt owed. There is also a possibility of paying off the entirety of the debt owed if a drastic change occurs in the financial status of the individual or organization getting the IVA, however, the choice to make such a move rests with the debtor. If the debtor does fail to keep up with the payments agreed, then the creditors are free to use other means to ensure that they get their money back.
The general lifespan of an Individual Voluntary Agreement is 5 to 6 years. There would be no contact from creditors to the debtor during this period. Just payments being made and possibly modification requests. Nothing legally binding.
It is important to note that the details of the IVA would appear on your credit report for up to 6 years from the date the agreement was set up and if the timeframe for the agreement exceeds the projected six years then it would last up to the date of completion of the IVA terms. The information about the fact that you used an IVA for a debt help is information that is made available in public domain as the application is submitted to a court and if granted then you have it appended against your name in an online register. This information would likely impact on the debtor’s ability to borrow from creditors.