What are IVA’s?
An IVA is a way of managing your debts through a legally binding repayment agreement. Because the IVA is supported by legislation, a qualified Insolvency Professional is needed to run the negotiations, especially if there are any court proceedings to deal with, and make sure you and your creditors interests are fully represented to one another. Part of your agreement will be to pay your creditors only what you can afford once all of your living expenses are covered and the rest will be written off at the end of the IVA term.
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?
All of your unsecured debts can be included into 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 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.
Does an IVA affect my Wife/Husband?
If you are still with your wife or husband your advisor will ask for basic income details, as they will need to factor them into your affordability. They will usually not need to speak to your wife or husband or collect any information from them unless you apply for a joint arrangement. If the arrangement is just for yourself, let your advisor know if you do not want your partner to know. Their credit rating will remain unaffected.
Does an IVA affect my boyfriend/girlfriend?
No. Your partners 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 why not set up a separate email account to deal with your financial planning?
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?
The actual process for you is lightning quick. An adviser will speak to you over the phone and run through a quick income and expenditure to see what you current financial situation is. 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 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 a proposal either by email or post. If you are happy with the proposal, just send it back alongside some proofs of ID and you are away!
After this, 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, you Insolvency Practitioner will apply to the county court for an Interim Order to stop your creditors taking any action until this 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.
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 IVA may ask you to release some of it at the end of your IVA.
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 too small to make reasonable payments to your creditors your IP will suggest other alternatives to an IVA.
How many debts can I include in an IVA?
You must have three or more debts to be awarded an IVA, and sometimes it is possible to have debts from the same lender classed as separate loans.
Can I live anywhere in the UK to have an IVA?
Only citizens who have been resident in England or Wales for at least six months will be eligible for an IVA. If you live outside of these countries, even if you have a UK passport, you will not be able to apply. In Scotland, you can apply for the equivalent Scottish Trust Deed
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.
Example Unsecured Debts
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