Stop all creditor contact now and write off your debt with an IVA, from £70 per month
What are IVA’s?
What does IVA stand for?
IVA stands for “Individual Voluntary Arrangement”. This means a formal voluntary agreement for an individual (not a company) to consolidate an individuals totalled unsecured debt into one reduced amount and payment.
How long does an IVA last?
IVAs generally run for 60 months or 5 years. However, it is possible to vary the term by either overpaying so it will be paid off sooner or taking a payment holiday for a few months (at your IP’s discretion) if an event in your life sets you back.
What debts can be included?
Anything else that could be considered a secured debt is not included, and this includes hire purchase agreements and loans for goods such as cars, white goods or furniture. Where a loan has been set up based on using possessions as security and you default, the goods are not yours to sell to pay off what you owe – the lender can take them back to cover the remainder of what you owe them. Check the IVA Criteria guide to see if you qualify.
Does an IVA affect my partner?
Will an IVA that I enter into affect my Partner?
If you are legally married or in a civil partnership your advisor will ask for basic income details, as they will need to factor them into your affordability for your IVA agreement. They will usually not need to speak to your partner or spouse about your debt or collect any information from them unless you apply for a joint arrangement. If the arrangement is just for yourself their credit rating will remain unaffected. Let your advisor know if you do not want your spouse to know.
If you are with a partner in a non-legal relationship (Boyfriend/Girlfriend), your partner’s credit rating will remain completely unaffected. Your advisor will need to know how much your partner earns if you have been living with them for 6 months or longer, but they will not need to speak to them and you can keep your IVA completely confidential. Your advisor can operate completely by email if you prefer, so you could set up a separate email account to deal with your financial planning.
Will my partner have to make contributions towards my IVA?
No. An IVA stands for an Individual Voluntary Arrangement which means that it pertains to an individual person. Your partner or spouse is not expected to make contributions towards your IVA even if you’re married or are living together. You’re the one who will be solely responsible for making your IVA payments every month.
That being said, there are some things to be aware of if your partner is living in the same house as you and is bringing income into the household. For instance, our creditors, as well as your IP, would expect your partner to make contributions towards your essential household expenses so that you have more money left over to contribute towards your IVA.
Where one person in a relationship is the debtor it is likely that the assets and disposable income belonging to the other person should be protected. It may be that the one without the debt has benefitted equally from the debt and this may be considered when assessing what is fair. However legally the debt belongs to the named person, and it is their IVA and not the spouse/partners. You can look at getting a joint IVA if you and your partner have joint debts.
Will I need to disclose my partner’s income?
The usual answer is yes – if only to demonstrate how the household finances work. If the debtor was unable to repay their debts because they were paying all household bills, whilst the partner was working but not contributing then creditors would not be satisfied. Total household income/outgoings usually need to be disclosed.
Can gambling debts be included in an IVA?
Debts with gambling companies can’t be included, although this isn’t common. Debts which result from gambling, such as credit cards, loans and payday loans can be included. You will have to commit to not gamble in the future.
How long does it take to set up an IVA?
Once you have received debt advice (or free debt advice) and you decide an IVA is the right debt solution for you, it can be set up relatively quickly. The general advice is that, barring any unforeseen circumstances, your IVA could be ready to go in a period of 4-8 weeks.
Before they begin setting up your IVA, your Insolvency Practitioner may petition your creditors to stop them from taking action against you while the agreement is being arranged. Next, they will take a look at your finances.
To set up an Individual Voluntary Arrangement (IVA), an adviser will give you debt advice and run through a quick income and expenditure to see your current financial situation is, this means they will look at your bank statements and credit rating to assess your monthly payments etc. They will then conduct a quick online credit check (with your permission). This credit check will show all of your outstanding debts, except for HMRC debts and a couple of other miscellaneous debts. Your advisor will look at your financial circumstances and work out how much you can afford to pay into your IVA, this will always be a heavily reduced amount and will include generous allowances for food, household bills, entertainment, childcare and other costs.
If you are happy with the new monthly cost, your advisor will send you an IVA proposal either by email or post. If you are satisfied with the proposal, just send it back with some proofs of ID and you are set.
After this process, an IVA can take between 4-8 weeks to set up depending on how complex your financial arrangements are. Once the IVA proposal is passed to creditors, it can take another 2 weeks to finalise. In the meantime, your Insolvency Practitioner will apply to the county court for an Interim Order to stop your creditors from taking any action against you until the IVA process is complete. All of this will happen in the background, so you can relax with the knowledge that this is finally all in hand. It is important to note that an IVA is a legally binding agreement and is one of many debt management solutions to deal with unsecured debt.
Will I have to sell my house?
No, there are now laws in place to prevent you from being forced to sell your home. However, if you have a certain amount of equity in your house, your Insolvency Practitioner may ask you to release some of it at the end of your IVA.
Can I get an IVA on benefits?
Yes, it is possible to qualify for an IVA if you’re claiming benefits, as long as you can afford to put a reasonable amount towards your unsecured debts every month – and as long as the ‘owners’ of 75% of your unsecured debt agree to it. And only if your combined income (your income and your partners) is in excess of £800 per month.
People who claim benefits to top up their income, like working tax credits, child benefits, or housing benefits, could well have a reasonable amount of disposable income.
However, people living off benefits alone are unlikely to qualify for an IVA – because they are likely to have a low disposable income.
An IVA is a form of insolvency for people who can no longer afford their repayments but can afford to contribute a monthly amount that their lenders find acceptable. If you’re ‘living on benefits, it’s unlikely you could do that – but there are alternatives.
If you’re claiming benefits, we could still help you to manage your debts if you’re struggling. Speak to one of our advisers to discuss your options. You could, for example, delay starting a debt solution if your situation is only temporary, and then apply for one later on if you still needed it.
If you’re in debt and you’re on a low income, then bankruptcy or a Debt Relief Order (DRO) might be more suitable. Talk to an insolvency practitioner for debt advice and they will work out the best debt solution for you.
Is there a minimum or maximum amount of debt I should have?
To have an iva you must have at least £5000 of unsecured debt and there is no maximum. However, if your debt is too large or your income is too small to make reasonable payments to your creditors your IP will suggest other alternatives to an iva.
What debts are included in an IVA?
All of your unsecured debts can be included in your IVA. These include credit cards, unsecured loans, payday loans, HMRC debts, council tax debts, overdraft and anything else which isn’t secured.
Anything else that could be considered a secured debt or loan is not included, and this includes hire purchase agreements and secured loans for goods such as cars, white goods or furniture. Where a loan has been set up based on using possessions as security and you default, the goods are not yours to sell to pay off what you owe – the lender can take them back to cover the remainder of what you owe them. Check the IVA Criteria guide to see if you qualify.
When you enter into an IVA, most of your debts including unsecured debts will be included, such as catalogues, pay day loans, credit cards, personal loans, overdrafts, gas arrears, rent arrears and electric arrears, council tax arrears, water arrears, store cards, income tax and national insurance arrears, tax credit or benefit overpayments, debts to family and friends, any other outstanding bills, for example, solicitor’s costs, invoices for building work and veterinary bills.
Your insolvency practitioner will confirm which debts will be included.
Can I live anywhere in the UK to have an IVA?
Can I include my mortgage payment?
Unfortunately no, because your mortgage is secured debt. Until you pay off your mortgage the property in part belongs to the bank and can be repossessed if you do not keep up your payments. If you have mortgage arrears you should speak to your IP before undertaking an iva as clearing the arrears may be difficult to do at the same time.
How much interest will I pay on my debts while I’m doing an IVA?
You pay not interest at all on your debt during the iva. In fact, all the interest, charges and penalties on your debts are frozen to allow you the chance to pay off what you owe to date. Your debt should only get smaller, not bigger with an iva.
What is an Insolvency Practitioner?
An Insolvency Practitioner – also known as a Trustee – is a highly qualified professional person with legal and financial knowledge who takes care of all of the administration of your iva as well as other debt management solutions for both individuals and companies. They will set up your iva, deal with any court proceedings if necessary and run your iva on a day-to-day basis over its term.
What do I have to tell my creditors?
You don’t have to speak to your creditors at all. Your Insolvency Practitioner will deal with your creditors from the time you engage them to represent you. Once you have your iva, it is illegal for them to contact you.
What happens if I cannot meet a payment?
Emergencies happen and this has been taken into account in the iva legislation in the form of a payment break. As soon as you know an emergency may mean you cannot make your payment (such as redundancy or a large essential household repair) tell your Insolvency Practitioner as soon as possible to arrange a sanctioned break from payments. They will speak to your creditors and ensure they know you will be taking a break, otherwise they will assume the IVA has failed and could move to take action to bankrupt you.
What if I change my mind while in an IVA and want to do a DMP?
Technically there is nothing to stop you doing this, however stopping your IVA places you in an awkward position. Without its legal protection, your creditors could move quickly to have you made bankrupt because you have already declared you are insolvent by having an IVA.
Can I go straight onto an IVA without doing a DMP?
Yes, there is no requirement or law that says you must have tried other debt management programmes to pay off your debts before doing an IVA. You don’t have to show you have tried and failed to tackle your debts before having an IVA. However it is a good idea to chat to your Insolvency Practitioner and see if they think another programme would be better for you than iva given your particular circumstances.
Will I be charged a lot of money for an IVA?
You have to pay your Insolvency Practitioner for their time setting up the iva, dealing with your creditors and administering the iva on a day-to-day basis. However, the cost of this comes out of the monthly payment you make, so you do not have to pay them any extra on top of this.
Will my Insolvency Practitioner take my money if I win the lottery? What about a bonus from my employers?
Every case is different. With the lottery it depends on how much you win. Ten pounds probably won’t be of much interest to them, but if you won several hundreds or even thousands of pounds it would be. It is down to the discretion of the Insolvency Practitioner. However, it is likely that a large chunk of your bonus will be used to pay creditors so you should be prepared for that.
What if I win a lot and don’t tell them – will they find out?
Most financial transaction including large gambling wins, are usually paid electronically so there will be a record on your bank statement. An Insolvency Practitioner is required by law to check your financial paperwork at regular intervals to ensure your payment level is appropriate for your salary, so they will ask for pay slips, bank statements and other financial documents.
Can I keep my credit card just in case I have an emergency?
You are not allowed to have any form of credit while you are undertaking an iva, and this includes credit cards, overdrafts, loans and store cards. Your Insolvency Practitioner will arrange for you to have a new basic current account that operates on cash and ask you to surrender all of your credit, debit cards and cheque books.
What if I forget I bought something on ‘buy now, pay later’ terms and the debt pops up after I start my IVA? Does that mean the IVA will fail?
It is very easy to forget a debt when it has a long deferment date before it becomes due for payment, but that needn’t mean the iva will fail. Your Insolvency Practitioner can apply for a Variation and the new debt brought into the payment programme. It will however depend on how happy your existing creditors are to share their payment with the new creditor, as their share will be effectively reduced.
Am I eligible for an IVA?
You may be wondering if you are eligible or qualify for an IVA? In order to qualify for an IVA, you must meet the following criteria:
- You should have a minimum debt level of £5000 or more
- You should have a minimum of 2 creditors
- You should be insolvent
- Have a regular income
- The ability to pay a minimum of £80 per month into the IVA
- An IVA should offer a higher return for your creditors than bankruptcy
- You must reside in England, Wales or N. Ireland
Please note that these points are only guidelines and each case will be assessed on its own merits.
If you meet (at least the majority) of the criteria above, you have a good chance of being approved for an IVA. If you are still unsure or not clear if you qualify for an IVA then don’t worry an insolvency practitioner will give you debt advice and a debt solution and will break it down for you.
Debts over £5000: Technically there is no minimum debt level required to enter an IVA, however, IVAs are generally considered most suitable for debt levels above £5000. Below a debt level of £5000 an IVA generally becomes less suitable than the alternatives solutions.
Minimum of 2 creditors: Having 2 creditors or more tends to give the Individual Voluntary arrangement (IVA) a better chance of acceptance, as creditors recognise the benefit of being treated with equality.
You must be insolvent: Your debt must be greater than the value of your assets, or you must not be able to repay your debts as they fall due.
How much does an IVA cost?
With an individual voluntary arrangement (IVA), you make payments towards your debts based on what you can afford to pay. However, there are other costs and fees involved with setting up an IVA.
If an IVA is right for you, we can help you set up your arrangement. We won’t charge you for the advice and support we provide before your IVA is set up.
Our fees follow the industry standard for IVAs and are agreed by your creditors. You must agree to the basis of the fees before your IVA is approved.
You have to pay your Insolvency Practitioner for their time setting up the IVA, dealing with your creditors and administering the IVA on a day-to-day basis. However, the cost of this comes out of the monthly payment you make, so you do not have to pay any extra on top of this.
The IVA fees you pay should be part of your agreement, so it’s important to check and understand them before you proceed.
- A Nominee fee
- A Supervisor fee
The Nominee fee is the cost for helping you to put the IVA proposal to your creditors. This is subject to approval by your creditors. Depending on who your creditors are and the amount of your monthly contribution.
The Supervisor fee is 15% of any further realisations, to cover the ongoing costs of the IVA. So, if you entered into an IVA you’d pay monthly contributions or money from assets to pay the Nominee fee at first. Then any remaining money you’d pay towards it would go towards the Supervisor fee.
There are also other costs known as disbursements. These are expenses that are paid to third parties during your IVA and include insurance to protect any money paid to your IVA, system maintenance fees, and a registration fee to register the IVA with the Insolvency Service.