The Myths About IVAs
No other subject gives rise to so many myths than personal finances. People carry with them misconceptions about money passed down through their families, passed on by friends and colleagues, by snippets overheard or stories read in newspapers. These are some of the most common that we hear, in fact some of these you may even have heard yourself.
Myth 1: You’ll get 90% of the debt written off
Many IPs in the past used this myth to make IVAs attractive and ‘pull’ people in to finding out more about them. Writing off most of what you owe while sounding lovely, but isn’t realistic as very few creditors are willing to accept seeing 90% of what they are owed written off. Many creditors may think they get more by making you bankrupt.
While it is difficult to put a precise figure on how much creditors would be willing to accept because each case is different, generally anything less than a 50% return would be considered too low.
Myth 2: You can get an IVA even if you’re on benefits
One of the laws about having an IVA is that you must have a regular income so you can pay back your creditors. This payment to creditors varies in amount, but is usually more than £175 a month. If you are on benefits you will not have this kind of income to pay back debts and cover your everyday living expenses.
For this reason, if you do not have a job you will not be able to undertake an IVA.
Myth 3: Once your IVA is set up you can ignore it and go back to ‘business as usual’
There is nothing ‘business as usual’ about an IVA. They are serious legal undertakings that must be embarked upon with careful consideration and a commitment to completing them.
Up until the point where you undertake an IVA, ‘business as usual’ has involved taking on large amounts of debt to make ends meet, and this is something you will not be able to do once you have an IVA. Obtaining credit while in an IVA is illegal.
You will have no choice but to change your life in order to ensure your IVA is completed successfully. The other option is that your IVA fails and your agreement becomes void. Free from the legal protection of the IVA, you will then be vulnerable to action from your creditors who may seek to make you bankrupt.
Myth 4: You always lose your home
Anyone undertaking an IVA will not lose their home. You may have to release some equity from it if there is enough and you can obtain a remortgage, but if not then you need not fear you will be made to leave.
There is no benefit to gained from creditors making you homeless, and IVA law has been designed to ensure this cannot happen.
Myth 5: You have no car and have to travel to work by bus or bicycle
Another myth is that the courts will appoint bailiffs to swoop down and take all of your belongings, including your car. In reality, you will never be left without a means to carry out your income-producing work. If you own an expensive luxury car you will almost certainly be asked to downgrade it to a less expensive vehicle to release some money to your creditors, but you will not be left without any means of getting around.
Myth 6: You will have to sell your wedding ring
On no account will you be asked to sell your wedding or engagement rings. An Insolvency Practitioner may ask you if you have any assets that can be sold, which does include jewelry, but under these circumstances jewelry that has been bought for an investment purpose is what they will have in mind.
To find out more about IVAs and whether they are right for you, call now and speak to one of our experienced IVA advisers now on 0800 987 5337
Example Unsecured Debts
|2||Credit card 1||£6,812|
|3||Credit card 2||£4,092|
|4||Credit card 3||£5,399|
|4||Credit card 4||£5,200|
Your Monthly Repayments Would Be
an IVA £748
(total contractual repayments)
an IVA £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here