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When you’re struggling with debt, it’s natural to seek any form of relief possible to reduce the stress and anxiety you feel daily. There are several debt solutions available for people who owe money and cannot keep up with their monthly repayments in the UK.
One of the most popular solutions is the Individual Voluntary Arrangement, which keeps your creditors at bay while you pay a monthly amount for a fixed time (usually over 5-6 years).
In this post, we’ll discuss the differences between an IVA and CCJ and how entering into an Individual Voluntary Arrangement might impact your court judgment.
What Is An Individual Voluntary Arrangement (IVA)?
An IVA is a legally binding agreement between you, your creditors and an insolvency practitioner. It’s often regarded as an alternative to filing for bankruptcy, and as long as you stick to the agreement, you’ll be able to repair your credit score eventually.
The eligibility requirements for an IVA are as follows:
You owe at least £6000 in debt (some insolvency practitioners will stipulate a higher amount)
There are at least two creditors
You have a regular monthly income
You can afford to pay back the minimum amount
If you don’t meet these eligibility requirements, you’ll need to explore another debt solution, such as a relief order or file for bankruptcy in the worst-case scenario.
What Is A County Court Judgment (CCJ)?
A CCJ is a legal judgment handed to a debtor from a court. It usually happens when a creditor takes a person to court because they owe money and haven’t paid it back. In most cases, the judgment arrives by post, and it will detail:
The amount you owe
Who you need to pay
Whether you need to pay in full or in monthly instalments
The payment deadline
If you receive a CCJ, it will remain on your credit file for six years, and if you can’t pay the amount back, you’ll be taken to court.
While it can be a worrying time, the worst thing you can do is bury your head in the sand and hope it goes away. You’ll most likely end up in court and face severe legal implications, which will impact your credit rating and financial opportunities in the future.
For this reason, we always advise people to either pay off their CCJ or seek debt advice from an insolvency practitioner.
Can An IVA Replace a CCJ?
If you want to avoid further legal action but need help to repay your debts, an Individual Voluntary Arrangement can be an effective solution. Instead of dealing with court appearances and angry creditors, you’ll liaise with an insolvency practitioner throughout your repayments.
When you enter into an IVA, the CCJ will be a part of it, meaning your creditors won’t be able to take you to court and contact you directly – as long as you meet your monthly payment obligation.
Your insolvency practitioner can also stop any active CCJ’s while your IVA proposal is ongoing. However, there are some things to consider.
Your Creditors Have to Agree to the IVAFor an Individual Voluntary Arrangement to proceed, your creditors must agree to the proposal. Most will because it guarantees they’ll receive a payment each month, and few people want to go through the court process, as it’s time-consuming and often drawn out.
Why Might My Creditors Refuse the IVA?If your creditors have an attachment of earnings order in place, they might not agree to the IVA. The attachment of earnings order guarantees that a portion of your monthly wages goes straight to your creditors. In some cases, your creditors might want to keep the order in place instead of removing it to enter into an IVA. However, you can ask your insolvency practitioner to try to reach an agreement with your creditors, but ultimately, it’s up to them.
What Happens to Charging Orders?If you receive a charging order, it means your unsecured debt is turned into secure debt. It enables your creditors to secure their debt against your home, and if a court chooses to grant the order, you could lose your property if you don’t repay your debts. An Individual Voluntary Arrangement won’t be able to remove the charging order, so if you have one, the insolvency practitioner will factor it into your living expenses budget.
Will an IVA or CCJ Impact My Credit File More?Both appear on your credit file and impact your credit rating, but a CCJ is out of your control. Only a creditor can apply for the judgment, but you can seek an IVA. While this might not seem like a big deal, it shows that you took proactive steps to repay your debt rather than waiting for your creditors to take action. If you’re worried about the future, then we’d always advise an IVA because even though it will show on credit and specific job applications, it’s always better to show you did the responsible thing by addressing your debts.
Applying For Credit With an IVAIndividual Voluntary Arrangements are legally binding agreements that have strict payment terms. If you secure one, it means you can stop your creditors from taking further action and gradually pay back any money owed. As long as you keep making ongoing payments, your IVA will continue, but there are rules surrounding what you can and can’t do. Many people question whether they can apply for credit with an IVA and the simple answer is yes – but there are some things to know first. For example, you’ll have to secure a written agreement from your practitioner if you want to apply for credit that exceeds £500, and any offers you do receive will have very high-interest rates.
Would You Like the Opportunity to Rebuild Your Credit Rating in the Future? Speak to an Insolvency Practitioner Today.
Being in debt can cause so much stress, but you’re not alone. Whether you’re dealing with impending county court judgments or are unsure how to repay your debts, the team here at UpSave can help.
We’re debt specialists and can offer free impartial advice, so you know which options are available. Please feel free to contact us today, and we’ll talk you through what can be included in an IVA and put you in touch with a licensed insolvency practitioner to move forward with the proposal.