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How does an IVA work?

If your debts are for £15,000 0r more, then an IVA is the route for you (Debts totalling £15,000 or less are dealt with by a debt management plan or if you have a low income or are unemployed then a debt relief order will solve your problems), and wish to propose an IVA to your creditors you will need the help of an Insolvency Practitioner (sometimes referred to as an IP) who is licensed to carry out negotiations with your creditors regarding the repayment of your debts.

Once you have appointed an IP, they will work with you and following a review of your financial situation they will work out how much you can offer your creditors, which can be as little as 25% of your total debt as full repayment of your debt.

He/she will then draw up a formal written proposal for your creditors, detailing your debts and how much you can afford to pay and over what time period.

This will be circulated to your creditors, who may or may not request modifications, though none can be made without your agreement.

A creditors meeting will be held to discuss your proposal. As long as 75% of your creditors accept the proposal, then it becomes legally binding and the court and all creditors are informed of the result of the meeting.

You make your agreed reduced monthly payments into the IVA for the agreed term. Once these have been fulfilled you will be debt free and any remaining debts will have been written off and you will have succeeded in your want to get out of debt.

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