Regular readers of our Bulletins will know that this is a regular heading and point of discussion!
We are very aware that many debtors are persuaded to make inappropriate IVA proposals by advisors who stand to benefit from the advice they provide. Some of those proposals are refused by creditors and the debtor then has to consider his/her other options. However, some are accepted, only to fail within the first few months when the debtor realises that the monthly contributions are simply unaffordable. By then, of course, what contributions have been made, usually only cover the fees of the Arrangement, so the creditor is worse off, his/her debts have increased and the creditors have received nothing.
Anyone considering an IVA would, therefore, be best advised to give the proposal considerable thought, not least to ensure that the monthly contributions are, indeed, affordable. If the debtor has a financial interest in a property, most IVA’s will require his/her share of the equity to be raised at the end of the 4th year and thrown into the IVA pot. We have had a number of calls recently where debtors in this situation have been unable, because of the restricted lending we are experiencing, to raise those funds. Whilst there are alternatives, without proper help and advice, it is often difficult, if not impossible, to overcome this hurdle and complete the IVA satisfactorily. If you are in this situation, please contact us for assistance.
We are also very aware that there are organisations who are trawling through the financial press and writing to those people subject to an IVA and advising that their Arrangement may well have been mis-sold. We regularly hear from people who have been encouraged by one of these ‘ambulance chasers’ to stop making the IVA contributions and pay a reduced sum to them, on the promise that they will deal with the outstanding creditors. It is rarely (rarely – if ever!) made clear to the debtor that if he ceases payments into the IVA, it will be deemed to have failed and the likelihood is that he will be made bankrupt.