January 2008 saw the launch of the IVA Protocol. This is common standard for IVA proposals and terms and conditions.
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What is the IVA Protocol?
Prior to 2008 there was no standard proposal format or terms and conditions for IVAs. Each IVA Company and Insolvency Practitioner could produce proposal documents in whatever format they favoured.
The idea behind the Protocol was to introduce minimum standards for consumer IVA proposals. This is was hoped this would make them easier for consumers to understand and creditors to accept.
Standards were set in areas such as the level of fees that insolvency Practitioners can charge and how equity in property should be considered within a proposal.
The protocol is not a legally enforceable standard. Insolvency Practitioners do not have to use it.
Has the Protocol made a positive difference?
There are long running discussions about the success or otherwise of the Protocol in terms of whether or not IVA agreements using these standard terms are more readily accepted by creditors or not.
However most consumer debt IVA proposals (involving debts mainly owed to high street banks, credit card and payday loan companies) do now follow the Protocol format.
Most Insolvency Practitioners will still use their own terms and conditions for IVAs involving business debts.
Updates to the IVA Protocol
Since 2008 the Protocol terms and conditions have been updated a number of times. Significant changes were introduced in 2014.
Arguably the most significant change brought in with the 2014 update can be found in section 9. This is the section which describes if and when equity must be released from property.
Subsection 9.2 now states that the attempt to release equity from the property in month 54 must be made by applying for a re-mortgage or a secured loan.
This has perhaps increased the changes that the individual will be able to release equity from their property and so will have to do this rather than falling back on simply extending their IVA payments for 12 months.
The amount of home equity is calculated using 85% of the property value. Any extra monthly mortgage / secured loan payments must not exceed 50% of the current monthly IVA payment.
The full Protocol terms and conditions are available here:
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