Being in a debt that you can’t repay is indeed a dreadful situation. In such situations, the only choice that people, in general, have is to file for bankruptcy. But, luckily for UK residents, there is a way out, by opting for an Individual Voluntary Arrangement or IVA.
If you are facing insolvency, an IVA lets you pay your debts in regular installments. Since it is a formal agreement, it enjoys legal protection. The terms are protected by law, and it is a must for you and your creditors to abide by them.
Now, when it comes to hiring an IP, there are many companies and firms that provide you with this service and claim to be the best IVA company. But first, you must know about the working procedure and eligibility to apply for the IVA.
How does an IVA work?
The entire arrangement is managed by an Insolvency Practitioner or IP, the one who deals with your creditors throughout the agreement period. You repay your debts through the IP, pay him/her a fee for the services offered.
But, first, you are required to prepare a budget that you must strictly follow. You can’t spend any additional amount outside this budget. Because doing so would amount to breaching the agreement.
Moreover, any earnings that you make outside this budget has to be contributed to repaying your debt. If you inherit any money or property, even that asset, has to be contributed towards the debt repayment.
In addition to that, if you want to get a mortgage of above £500, you must get approval from your IP. All of these are just the fundamental terms of an IVA. There can be additional terms made between you and your creditors. You can also ask your IP to propose a change in terms, and ask for the creditors’ approval. An IVA generally lasts from 5 to 6 years.
Can You get an IVA?
Whether you can get an IVA depends on your financial situation. You are not eligible to get an IVA if you owe only one creditor. There have to be at least two creditors whom you need to repay.
Another necessary condition is that your debt must amount to a total of £10,000 (this is the least amount). If you fulfil these criteria, the option for applying for an IVA is promisingly valid for you. However, you must thoroughly consider a few aspects before going ahead.
Do You have to get an IP for Your IVA Agreement?
The Insolvency Practitioner in an IVA, can be seen as a link between the debtor and the creditors. He/she is a very crucial part of the arrangement. In fact, you can’t get an IVA without an IP. You can’t manage the arrangement by yourself. Suppose you’re an IP yourself, you would still have to hire a practitioner. According to the preliminary terms, you simply can’t manage your own IVA.
How to hire an IP?
You can hire an IP from one of the many firms that provide debt advice and solution as a service. You have to contact the practitioner and apply on the basis of the rules set up for an IVA.
But before that, you’ll be required to provide the details of your income, savings, and assets. Along with that, documents such as bank statements, pay slips will also be required for this purpose. In addition to that, you must also inform them of any agreement of rent, or mortgage, in case you have one. Further, you are required to provide them with the details about how much debt you owe and to which creditor.
Lastly, you have to present them with your budget proposal. This has to be in accordance with your expenditures and income. Typically, IPs take a percentage of the debt you pay through them as a part of their fees. They generally take it in the form of a series of installments along with the debt.
How do You Choose the Best IVA Company?
There are many IVA companies that offer you impeccable services in terms of debt solution. But, for your own interests, you need to find the best IVA company. Now, what the best company would be for you depends on your situation.
In other words, a company that you find suitable might not be suitable for another client. So, how to find a company that meets all the requisites? It’s quite simple. You just have to make the following considerations:
The Confidentiality they Provide
When you get an IVA, you would have to share your financial details with the company. Now, you would definitely want a trustworthy agency, who can keep them securely. After all, one of the biggest reasons people get an IVA is to avoid the supposed shame caused by bankruptcy. So, you must make sure that you are provided with full confidentiality.
Its Market Value
A very important aspect you might want to consider in an IVA company is its reputation. So, try to know what their former clients have to say about them. Consult people who have worked with the company or used their services, previously.
In today’s technologically advanced time, it is quite easy to gather information about a company. You can simply read the feedback, the company has received, on the internet. The higher the reputation the better they would probably be. But, these highly-reputed companies might often have a high fee. So, that is another consideration you must take into account.
2. Fees they Demand Upfront
When you apply for the service from the best IVA company, they would generally ask for a certain amount, as their service charge that you have to pay upfront. This fee is for setting up the IVA and the IP will get to work only after you pay it.
You might find this amount too high. Since you’re already in debt, it is understandable that you don’t want to pay the fee being demanded. In such cases, you must look for a company that demands a fee that you find affordable.
There are also certain companies who don’t take any fee to set up your IVA. But, such companies are not necessarily the best. So, consider every aspect before you hire their services.
Among every other factor, you must also consider the experience that a company has. It would be better that you choose a company that has been in this field for a considerable number of years, after being established. This way you can be sure about the quality of their service. Having a look at the cases they supervised in the past, it would also help you to make a choice.
The Monthly Instalments they Ask for
The main reason you get an IVA is that you gain the capability to clear your debt, in a suitable form of instalments. You must also remember that the service charge of your IP would be included in those instalments.
Thus, there is a valid demand that you would want the instalments to be as affordable as possible. Most of the IVA companies often ask for a monthly payment that a person in debt won’t find affordable. But, fortunately, there is no lack of companies that offer you their services at low monthly instalments. However, unable to pay your instalments will put your IVA at risk of being cancelled. So, you must always consider the best IVA company.
Ease of Applying
A good IVA company would always provide considerable ease in applying for their services. So, you must definitely consider this aspect. Some companies even allow you to apply online and submit your information in the same way. So, why go to a hassle prone service agency, when you have enough easy-to-access IVA companies to choose from.
Here are some of the best IVA companies:
- National Debtlines
- Debt Advices
- Debt Relief Support
- Money Advice Service
- Credit Fix
- Step Change
How to know when You shouldn’t choose an IVA company?
You have seen how you must choose the best IVA company for your requirements. But among a large number of options, there are some that you might want to stay away from. It would be very useful to you if you know how to tell if a debt management company is fraudulent.
So, how would you know when to steer clear the facts associated with a particular IVA company? Well, it’s not that hard to tell. All you have to do is lookout for the following signs:
Failure to Provide Details
While looking for a suitable IVA company, you can possibly come across a fake one. Choosing them would mean getting scammed. Since you’re already in a bad financial condition, you must avoid such situations at any costs. While choosing a company, always demand specific details regarding their services. If they know they have enough experience, they would surely be able to answer and mitigate all your queries. If not, then there’s no reason to invest your valuable time with them.
No Money-back Guarantee
As you know, many companies demand some upfront payment to set up your IVA. Now, it is possible that they fail to set up the arrangement. On top of that, they might not guarantee a return of your money in such cases. Going for such companies would be an unnecessary risk that you shouldn’t take. Choose one that doesn’t charge any upfront fee. Or, one that guarantees to return your money in case of failure.
Low Success Rate
Suppose find a company that demands a very affordable price and is very convincing. But then you see that they don’t have an impressive rate of success. In such cases, it would always be wise to look for other options. Otherwise, you would be taking an unnecessary risk by hiring their services. Since insolvency is a very serious situation, you must not take such risks while getting an IVA.
All IVA companies require a license from the government to be able to provide their services. So, before choosing a company, always check whether they’re licensed, and authorized to carry out their services. You must also be sure that the IP you hire holds a valid license and is a certified lawyer or accountant. If a company is unable to provide you with these, then it would be best to avoid them.
What if You are unable to Pay an Instalment?
The company you have chosen might offer a very affordable price, but you might still come across a situation where you’re unable to pay an installment. This might be due to the worsening of your financial condition. In any case, it would be a breach of the terms and would endanger the arrangement.
Thus, you can propose a change of terms with the creditors. If they don’t agree, the only option left would be to terminate the arrangement, though the amount you have paid would be written off your debt.