The rules of an IVA
If you're looking for the right debt solutions it pays to do your homework, as making the wrong choice could be costly.
It's only when you fully appreciate the true differences between an IVA, a Debt Management Plan (DMP) and Bankruptcy, that you'll be able to make an informed decision on how to tackle your debt problem.
That's why reading about an IVA and how it'll impact on your personal circumstances is the great place to start.
The IVA Protocol
IVAs were introduced into UK law in 1986 as part of the Insolvency Act, and it's this legislation that underpins all IVAs.
But the structure of the IVA was streamlined in 2008 with the introduction of The Straightforward Consumer IVA Protocol.
The IVA Protocol forms the bedrock on which each Protocol Compliant IVA (PCIVA) is constructed and, whilst each IVA is still unique, all PCIVAs conform to these standard terms.
Even non-compliant IVAs will share many of these conditions as they are seen by all parties as being efficient, well balanced and fair.
IVA Protocol rules
Here are some areas covered by the IVA Protocol, and a brief explanation of their relevance
- Transparency:
It is the responsibility of the applicant to accurately disclose all information relevant to their circumstances within their proposal and ensure their income and expenditure statement represents an accurate assessment of their financial needs. - Verification of information:
Where possible, the IP must verify the information contained in the proposal and, when relevant, ascertain the value of any assets and the outstanding balances of all unsecured liabilities. - Discretion, variation and failure:
The Protocol outlines the Supervisor's duties, defining where they have discretion to modify the agreement, when they must seek creditor approval through a Variation Meeting and what constitutes a failure of the arrangement. - Standards of advice:
The IVA Protocol obliges Insolvency Practitioners to ensure that all of their introducers are licensed and authorised by the Financial Conduct Authority (FCA) for the provision of debt advice.
Each of the points above outlines what the IVA Protocol expects of the IVA process and those involved within it.
These next points refer to the some of the more important obligations that the Protocol places specifically upon the applicant.
IVA Protocol obligations
Failure to comply with these conditions could lead to an IVA being failed.
- Equity clause:
The Equity Clause details the obligations placed on homeowners. It details when they must evaluate the equity in their home and the extent to which they are obliged to try and release part of that equity into their IVA. The clause also specifies several limitations, introduced specifically to protect the applicant from being exploited, and it details the course of action required if, for whatever reason, equity can't be released. - Windfall clause:
The Windfall Clause details the obligations placed on the applicant in the event they receive a financial windfall during the term of their IVA. It highlights the time limits for disclosure of the windfall and specifies the obligation to introduce the windfall into the IVA for the benefit of creditors. - Redundancy clause:
This clause outlines what should happen in the event of an applicant's redundancy. It details the requirement to notify the Supervisor and also dictates how much of any redundancy payment must be introduced into the IVA.
The above points are generally considered to be of most importance to IVA applicants as they relate to the most frequently encountered changes to personal circumstances.
Built-in stability
The protocol also introduced a couple of options to provide a degree of stability should the need arise.
- Payment break clause:
This clause provides the IP with discretion to introduce a payment break. It also details the remedial action required to ensure the creditors are not unduly disadvantaged by the payment break. - Payment reduction clause:
This clause provides the IP with discretion to reduce IVA contributions by up to 15% of the agreed level. Reduction to the IVA payment would only be granted if verification confirmed that current contributions were no longer affordable.
There are many other clauses in the IVA Protocol which detail different obligations placed on Insolvency Practitioners and creditors, and the behaviour expected from both.
For more information on specific areas of the protocol please feel free to give our helpline a call.
Professional IVA Advice
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All our advice is free, confidential and comes without obligation.
If you're considering entering an IVA and would like to have a chat us then please call 0800 088 7502 or alternatively, complete this form and one of the team will call you back at your preferred time.
