Historically, during the preparatory stage of an Individual Voluntary Arrangement (IVA), the IVA applicant would have been instructed by the Insolvency Practitioner acting as Nominee to stop paying money to their creditors with immediate effect.
This was normal procedure.
There were two main reasons for this approach.
- Firstly, it helps the IVA applicant to immediately arrest their deteriorating financial position. In most circumstances, the IVA applicant’s financial problems would have been worsening each month due to their unaffordable repayments. The Insolvency Practitioner would not have wanted the situation to worsen any further.
- Secondly, instructing the IVA applicant to stop making payments avoided the possibility of one creditor being preferred over another. The Insolvency Practitioner has to be seen to be acting fairly to all parties concerned, including the creditors. If one creditor had continued to receiving repayments towards a debt then another creditor could have alleged the Insolvency Practitioner was showing a preference to that creditor over them.
The Insolvency Practitioner would instead have instructed the IVA applicant to make contributions towards the ‘IVA fund’ during the interim stages of the IVA application process, and these payments would form part of the arrangement once the creditors meeting had taken place.
The Insolvency Practitioner would also be able to demonstrate to creditors two further things. Firstly, that the IVA applicant was able to afford the payments since they had already begun paying, and secondly, they could claim the payments showed the willingness of the IVA applicant to reach an agreement - thus strengthening the application.
But recently the overall stance has changed at My IVA Adviser.
We now believed that it is in the IVA applicant’s best interest to try to keep up with their repayments to creditors whilst the IVA application process is under way, again, for two significant reasons.
Firstly, due to the often relentless pressure creditors can sometimes apply towards people who miss a repayment, it is now considered best practice to try and avoid missed payments becoming an issue , at least until there is a positive outcome to the creditors meeting.
Secondly, we now believe that it is in the IVA applicant’s best interest to try to minimise the impact of applying for the IVA, just in case the IVA is rejected. Whilst there is a small possibility that creditors might reject the IVA proposal, our Insolvency Practitioner will not want to deliberately spoil relations between the applicant and their creditors if it can be avoided.
If it is not possible to maintain the agreed repayments to their creditors at the contracted levels, then the IVA applicants are being asked to offer ‘token’ payments instead. This usually appeases creditors whilst the IVA application is being worked on, and allows the IVA applicant to avoid the harassment that would normally accompany any missed payments.
If you are considering an Individual Voluntary Arrangement (IVA) as a possible debt solution, but you have not decided on which Individual Voluntary Arrangement (IVA) company you will be using, then read this article on “How do I find the best IVA Company for me“, to help you with your decision.
Remember, because My IVA Adviser does not charge any upfront fees, nor ask you to make any contributions towards your IVA before the creditors meeting has taken place, you will have the assurance that you will have sufficient money available to keep up with your payments, or offer ‘token’ payments until the successful outcome of your IVA is known and assured.
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