Is An IVA Worth It?
What is an IVA?
An IVA (Individual Voluntary Arrangement) is a statutory contract between you and your creditors. You pay back only what you can realistically afford with the remaining debt being written off. The IVA agreement covers all of your unsecured debts including mortgage shortfalls, personal tax debts, loans, credit cards, catalogue and store cards, overdrafts etc.
Is an IVA right for me?
We will look at your individual circumstances taking your income, your day-to-day expenditure, any assets you own and your type and level of debt into account before suggesting whether an IVA is right for you. We will never suggest an IVA unless we truly believe it is the best option for you and that you are happy with the proposal you are making to your creditors.
We are here to sort your financial issues and to do so we assess each individual client’s circumstances to ensure you are fully aware of all options available to you. We do have relationships with other firms and if we believe they are better suited to helping you with your financial difficulties, with your agreement we can arrange for you to speak to them.
What will my monthly payments be?
The IVA monthly payments are tailored to your individual circumstances and should be as much as you can reasonably afford after you have accounted for all living costs. The amount should be a realistic amount that you can afford and that is acceptable to your creditors. Whatever you propose should be viable for the duration of the proposed IVA and we will take into account any impending changes to your circumstances when we prepare your IVA proposal.
Is it true that an IVA will write off the remaining debt that I cannot afford to pay?
If you pay into your IVA everything that you initially proposed to your creditors and stick any other terms of your proposal, and your personal circumstances don’t change beyond normal cost of living increases, then you will not be required to pay any more than what was agreed in your IVA. Any remaining debt you had will be written off by your creditors and you will officially be free from your unsecured debt once the IVA completes.
What is the criteria I need to meet for an IVA?
There are no set criteria for an IVA. However, for it to be a realistic option usually you will:
- have unsecured debts of more than £6,000
- have 2 or more different unsecured creditors
- have a monthly surplus of at least £100
These criteria are a guide only, and you may still be able to consider an IVA even if your circumstances fall outside of these guidelines. You can still propose an IVA if you have been made bankrupt, however to establish if this is an option for you we would need to discuss your individual circumstances in more detail.
How long will my IVA last?
There is no legislative limit to how long you can propose your IVA to last for, but generally creditors expect a monthly contribution based IVA to last for five or six years depending on your individual circumstances. You can also propose an IVA based on a lump sum offer which would see the IVA complete much quicker, dependent on when the lump sum can be available and your creditors involved. The IVA length will be tailored to your personal circumstances and ultimately agreed by you and your creditors.
How long does it take to arrange an IVA?
This depends on how quickly we receive the required information from you. The quicker we receive information from you each time it is requested, the quicker we can get your case approved. We want to help enter you into the certainty of an IVA as soon as possible.
How are joint debts dealt with?
If you have joint debts, then you are both liable for the whole amount of the joint debt, even if only one of you goes into an IVA. An IVA will only deal with your liability. Any joint party will remain responsible for repayment of the whole of the debt outstanding. However, their liability should reduce as your IVA progresses and payments are made to reduce this debt.
Where there is a possibility that an IVA may adversely affect another person, we will advise the affected party to take independent advice, although they could also apply for an IVA, or you could propose IVA’s together making a combined offer to creditors which is known as “interlocking IVA’s”.
Should I maintain repayments to my creditors before my IVA is accepted?
Whilst waiting for your IVA proposal to be accepted by your creditors, we do advise you to maintain at least a token contribution to all your creditors, even if this is below your minimum monthly payment. Failure to do this could affect your credit rating.
What happens to my credit rating in an IVA?
An IVA will show on your credit file for exactly 6 years after the approval of your proposal, or until the IVA completes if this is longer than 6 years.
Unfortunately, we do not have any remit to update your credit file directly – that responsibility rests with your creditors and they will typically update your credit file data 2 or 3 months after we issue your final report.
We would advise that following the completion of your IVA that you visit the Equifax, Experian and Call Credit websites for more information on your credit file and actions you can take to ensure the information held is accurate and up to date, and to check that the IVA information is removed. Please also ensure that you keep a copy of your IVA final report and completion certificate safe as if there was any difficulties with your IVA being removed from your credit report you may need it to evidence that the IVA has come to a successful conclusion.
Do I need an Insolvency Practitioner (IP) for an IVA?
Yes, you must appoint an IP to manage your IVA. Having a qualified professional also takes the worry of having to deal with creditors and, as IPs are industry regulated, they are bound by a legal code of practice.
The role of the IP in your IVA is firstly to negotiate the terms of your IVA proposal and work on your behalf to seek approval of your draft. Following approval they manage the payments to your creditors and act as a point of contact. They also ensure your IVA follows legislation and all required documentation is filed with the necessary courts.
What is the cost of an IVA?
An IVA can only be prepared for you by a qualified licensed Insolvency Practitioner, so there are inevitable professional fees. However, the fees are deducted from the total funds offered to creditors in the IVA and the creditors have the final say on our fees and will modify them if they wish. So unless you are in a position to repay creditors in full plus the costs of the IVA, the fees and costs are borne by the creditors and agreed with them.
Will I have to close my bank account?
If you have debts with the same bank as your current account, they may be able to take money owed from the current account, whether you can afford it or not. This is called the Right of Set-off.
Therefore, we strongly advise that you arrange a new basic banking facility before starting your IVA, with a provider that will not be included as a creditor in the IVA. This will ensure that no funds could ever be set-off from your bank account.
People entering an IVA can occasionally find it difficult to open a basic bank account as they have adverse credit history, so we will help discuss with you what accounts are likely to be available based on your circumstances.
As an IVA is a private matter, your new account provider does not need to know about your IVA.
Can creditors change their mind once the IVA has been agreed?
Creditors have 28 days to appeal to the court from the date of approval to overturn your IVA acceptance but there needs to be grounds for this.
Once the IVA arrangement has been agreed, your creditors are bound by the terms and if you maintain your obligations, (i.e. keep up the payments and tell your supervisor if your circumstances change) they cannot take further action against you and interest and charges on the accounts cease.
Will my proposal be approved?
For your proposal to approved, at least 75% of your voting creditors by value must vote to approve the proposal. The good news is that if any creditor rejects your proposal, if the approving creditors hold higher than 75% of value, the proposal will be accepted and the creditors who rejected are still bound by the acceptance. If only one creditor votes and they vote to accept the proposal, then all creditors are bound by the IVA, regardless of them not submitting a vote. If no creditors vote, then the IVA would not be accepted, and we would have to discuss your options based on your circumstances with you at this point.
What happens if my proposal is rejected?
If your IVA proposal is not approved, we will gather information from the rejecting creditors to understand why it rejected and see if there are any changes we can make to the proposal to gain their subsequent approval. A creditors meeting can be adjourned for a maximum of 14 days from the original meeting date to try to overcome any issues raised at the creditors meeting.
If your proposal is still rejected, we will then discuss your alternative options with you, which will be based on your individual circumstances.
2: Your Home and Property
Is my home safe in an IVA?
Yes, unlike Bankruptcy, an IVA protects property and the equity held within it. As a result, an IVA applicant will not be required to sell their home and your property is safe, providing you maintain all security repayments such as mortgages and secured loans. Secured loans cannot be included in your IVA unless you actively propose to sell your home and include any secured loan shortfall as a creditor.
Creditors will expect that you try to release any equity at a pre-arranged time towards the completion of the IVA term. If you cannot release the equity, then the IVA could be extended by an additional 12 months in lieu of the equity. If you have limited or no equity at this time, you may not need to pay anything further and your arrangement ends.
At no point in the IVA will you be asked to sell your home, unless you actively propose this yourself to your creditors as part of your IVA.
To ensure you do not attempt to sell or re-mortgage your home during the IVA term, the creditors request that we register a restriction on the property for the IVA term, which means that the property cannot be sold or re-mortgaged without our permission. Once the IVA has completed, we will remove this restriction once the final report has been sent to you, your creditors and the Insolvency Service.
You should also read the equity clause in your proposal or speak to a member of our team if you have a more complex situation and we can advise you accordingly how it could be addressed.
What does the equity release in my home near the end of my agreement entail?
Your IVA proposal document will detail the specifics of this requirement but in most cases you are obliged to attempt to release equity 6 months before the last contribution of your IVA.
Once we reach this time we will calculate the value of your equitable interest and – depending on how much is available – will then advise you as to what action (if any) you need to take. In general, there are three possible outcomes:
- If your equitable interest is determined to be £5,000 or greater, you will need to attempt to remortgage to release this equity.
- If your equitable interest is determined to be less than £5,000 but there is some equity in your property, you may be required to make up to an additional 12 monthly repayments to your IVA in lieu of the equity in your property.
- If your equitable interest is determined to be nil or your home is in negative equity, you will not be required to do anything – your equitable interest will be excluded as an asset of your IVA because it has a minimal value. Your IVA will then complete once you make your last repayment.
If you fall into option 1and you are unable to obtain a remortgage or obtain a secured loan product you will then be obliged to either:
- offer a third-party lump sum equivalent to 85% of the value of your interest in the property; or
- make up to an additional 12 monthly contributions
This obligation is a significant and important one so if you have any queries or concerns about it please get in touch with us and we will be happy to help.
Can I apply for an IVA if I do not own my home?
Yes, of course. You can rent a property, be part of a shared ownership scheme or live with parents whilst in an IVA.
I own a property overseas; do I need to mention this in my IVA?
Yes. All assets owned by you (other than household items) need to be declared in the IVA. However, each asset needs to be assessed on its own merits so you may still be able to retain assets with your creditors approval.
What if the opportunity arose for me to buy my own home while I am renting and still in my IVA?
While you are in an IVA, you are unable to obtain further credit exceeding £500, therefore if you wish to consider buying your own home while in an IVA, you must first speak to your Supervisor and obtain their consent.
If you can secure a mortgage deposit from a third party, qualify for a mortgage product and provided your monthly mortgage payment is no greater than your monthly rent, your Supervisor is unlikely to have any objection.
You must also reassess your expenditure to confirm that the costs of obtaining the new property will not be detrimental to maintaining your IVA contributions. You may also be required to put forward a variation to your creditors to gain their approval to be able to do this.
What if I have a buy-to-let property, a property portfolio or I named on a family members property – can I still propose an IVA?
The short answer is yes, however we would need to make a more detailed assessment of your circumstances to ensure you get the correct advice and it is tailored to your individual situation. Please contact us for a thorough assessment of your property situation.
3: Your employment or self-employment
Can I enter an IVA if I am not in full-time employment or unemployed?
Yes, provided you are in a position to make an offer to your creditors and meet the other criteria then you can apply for an IVA.
Can I apply for an IVA if I am self-employed?
Yes, of course. However, IVAs for self-employed people generally require additional documentation including trading projections, and your creditors expect you to detail your business assets as personal assets in your IVA.
Can I continue to trade in an IVA?
Yes, you can. IVAs have helped thousands of sole traders, partners or company directors remain in business when faced with severe financial problems.
If you own a company or are a director of a limited company, generally you can retain your position whilst in an IVA, which is not the case should you be declared bankrupt. However, always check your Company’s Articles of Association to determine if there are any restrictions on acting as Director if you enter an IVA.
If I enter an IVA, can I still retain a position of public office, e.g. Company Director?
Unlike bankruptcy, an IVA does not legally restrict your ability to hold positions such as a Justice of the Peace or Governor of a School. However, there could be restrictions in the case of a Company Director depending on what the Company’s Articles of Association states.
It can also be the case that it is written into some employer’s terms of employment that entering an IVA results in dismissal, particularly if they worked in finance or insolvency.
4: After my IVA is Approved
What if I come into money (a windfall), get a pay rise or work overtime during my IVA?
If you have a windfall during your IVA, work overtime or your monthly income increases, you will need to inform us, so we can look at how this affects your IVA going forward.
If you are in a monthly contribution-based IVA, if your monthly income increases, then depending on the level your monthly payments may also increase. Usually you can retain a proportion of the extra income, but this would be based on your individual circumstances.
For overtime, you usually pay a fixed percentage into the IVA every month as you receive it.
If you receive a windfall, generally if it is under £500 you can retain it. If the windfall is over £500, but not enough to pay back all monies owed in your IVA, then it is expected that the full amount would be given to your creditors on top of continuing your current monthly payments.
Also on the anniversary of your approved IVA, we will conduct an Annual Review to look at any changes and make sure that your payments are still affordable and reflective of your monthly surplus.
How will I know how my IVA is progressing?
The Supervisor of your IVA is required to issue an annual progress report to you and your creditors within two months of the anniversary date of the approval of your arrangement – that report will help you understand how the arrangement is progressing and whether there are any issues that need attention so please ensure that you read those reports each year.
I have missed some payments to my IVA. What can I do?
If you have missed some payments to the IVA, the most important thing to do is get in touch with us. We will work with you to resolve any issues and agree a realistic way forward. Remember, we are here to help and support you and a resolution is only a phone call or email away.
What happens if I am struggling with my monthly payments?
If you are struggling to make your monthly payments, the first thing to remember is don’t panic and to contact us. We are here to help in any way we can. It is important you remember you are not alone.
We don’t want any of our clients to be worrying every month about whether they can make their next payment. We will always do our best to make sure your IVA works for both you and your creditors.
If you are struggling due to changes in your circumstances if necessary, we can assess your individual circumstances and potentially apply a ‘variation’ to your IVA. Or if there has been a one-off unexpected expenditure we will look at the possibility of a payment break for a short period. Your options will be discussed with you based on your individual circumstances.
I will be going on maternity leave, will this affect my payment plan?
If you are pregnant or on maternity leave before your IVA begins, we will assess your ability to maintain your contributions over this period and your payments should change accordingly when your maternity leave ends. If you become pregnant during your IVA contributions period we will reassess your individual circumstances and your maternity pay entitlement.
We could look at reducing your monthly payments on a temporary basis to reflect your reduced income during your maternity leave or be able to offer a short payment break from your IVA. It is worth noting that you will still owe the same amount of money set out in your IVA, but your payment following the break may be increased or the length of your plan extended to recoup the missing funds.
When your maternity leave comes to an end, we may need to assess your circumstances to account for any financial changes to your situation and any changes will need to be reflected in your future payments.
You may also be able to ask your creditors if they will vary the terms of your IVA to accommodate your change in circumstances.
What happens if I lose my job during my IVA?
We understand the impact losing a job can have on your personal life and we will always do our best to find a solution that fits your circumstances, which is why it is important that you contact us as soon as you anticipate any changes.
Depending on your circumstances, we may be able to offer a short payment break to give you time to regain employment and return to a position of being able to afford your monthly repayments.
It is worth noting that a payment break does not mean that the missed payments will be removed from your plan. You will need to recoup these costs by either extending your plan, increasing your payments temporarily or making a lump sum payment.
Once you have obtained new employment we will also look at whether we need to adjust the amount of your repayments based on your new income. You may also be able to ask your creditors if they will vary the terms of your IVA to accommodate your change in circumstances.
What happens if I am made redundant?
The terms and conditions of most IVAs require you to disclose any redundancy payment that you may receive to your Supervisor. They also stipulate that you are entitled to retain a maximum sum equivalent to 6 months’ net take home pay with any surplus above that amount being due to your arrangement. This is on the basis you can secure alternative employment within that period. We will look at the individual case when it comes to a change in circumstance but usually with redundancies the following process takes place:
- We will look at the size of redundancy package and will decide how much of it (if any) you will give to your creditors to repay your debt, while still allowing you to retain funds from it to maintain your normal household income and expenditure and your monthly IVA contributions for a minimum of 6 months.
- When you regain employment within 6 months, we will review how much of your remaining redundancy funds you will then need to contribute toward your IVA and what your monthly payments will be going forward.
- If you are still unemployed at the end of 6 months, we will need to
re-evaluate your circumstances and affordable monthly payments and could result in a variation being made to your creditors.
Please remember that you are still in a legally binding contract with your creditors and the repayment of your debts still stands but we will do everything we can to come to the best solution for you and give you as much time as possible to get your finances back on track.
If you receive a significant redundancy package, you might want to consider trying to introduce a lump sum to settle your IVA early. We will discuss this option with you if we feel it is a possibility.
5: After my IVA is Approved
Will I receive anything when my IVA completes?
When the Supervisor of the IVA is satisfied that all obligations have been fulfilled, we will issue a final report together with a Completion Certificate. A copy of that report will be sent to you, each of your creditors and the Insolvency Service advising that the IVA has ended.
The final report will include information regarding all funds received into the IVA and what has been done with those monies. It will also show how much of your debt has been repaid (the dividend) and how much has been written-off by your creditors.
What could be delaying the closure of my IVA?
In broad terms, our ability to close an arrangement will be impacted by an outstanding obligation that needs to be addressed. The most common obligations that arise will typically relate to the following:
- An outstanding requirement in relation to any obligation to release equity; and
- An outstanding amount due to the IVA in respect of additional income;
- Unresolved arrears that accrued in respect of missed payments during the IVA.
If you think that you do not have any outstanding obligations and your IVA should be completed and it has not, please contact us, so we can provide you with an update.
How & when will my name be removed from the Personal Insolvency Register?
When you successfully complete your IVA, we will send a copy of your Certificate of Completion to The Insolvency Service. The Insolvency Service will update their register, and your details will be removed from it. Please note that this can take up to three months for the register to be updated although it is normally much sooner than that.
What is the next step?
All you have to do is have a FREE no obligation chat with one of our experienced advisors. Our experienced team have written successfully completed over 30,000 IVA’s and can take care of all of the hassle and negotiations for you after they have discussed in depth about the different options available to you. We have helped our clients in a wide range of situations so please do not worry as there has never been a situation that we have not seen and can help all of our customers move on from their debt problems.
We provide confidential and FREE expert advice to anyone who is struggling to make the repayments on their borrowings. We take care of all of the hassle in negotiating with your lenders/creditors. As we are authorised and regulated by the Financial Conduct Authority and have all relevant debt solutions in-house, we assess your circumstances and guide you to the most suitable solution for you.
If another debt solution is better for you, we’ll advise you of it during your free consultation If you are worried about the cost and affordability of repaying all of your debts then call to arrange a no obligation chat with one of our experienced advisors today on 02890 393626.