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What is an IVA?
With an Individual Voluntary Arrangement (IVA) you can make affordable monthly payments towards a percentage of your debt for 5 years. At the end of the 5 year plan, your remaining debt will be completely written off.
Benefits of an IVA
Here is a list of the cost common advantages of an Individual Voluntary Arrangement (IVA):
• Affordability – You will only be asked to pay back what you can afford, with allowances taken into account for food, bills, entertainment, travel, childcare and others. You may be sacrificing certain essential costs at the moment. With an IVA they are budgeted for so they will no longer be neglected
• No upfront costs – When you set up an IVA, there are no upfront costs whatsoever. This means that you can put a debt solution in place today without spending a penny
• You have a finishing line – Do you feel like there will be no end to your debt problems? With high interest costs and charges, the balances of your credit accounts may not reduce as you need them to. With an IVA you will become totally debt free at the completion of the IVA (usually 5 years). You can use this as an opportunity to change your financial life, for good
• Confidential – Your IVA is not advertised in the London Gazette or local newspaper. It is your decision whether you would like to disclose it to other people or not
• No more contact from creditors – When you are in an IVA, your creditors will no longer have the right to contact you or refer the debt on to debt collectors/bailiffs. This is a great benefit for most people as it will take away the stress caused by constant calls/texts/emails and home visits
• Stay in your house – Unlike some debt solutions, an IVA will allow you to stay in your current home. This is even the case if the property has a mortgage or is owned outright
• Your pension – An IVA does not have an impact on your pension. You will not have to surrender your pension or withdraw money from it to pay into your IVA
Risks of an IVA
Here is a list of the cost common disadvantages of an Individual Voluntary Arrangement (IVA):
- Equity Release – If you own your property and it has value, you may be asked to release the equity in the property
- Credit Rating – If you have a perfect credit rating, this will be damaged and you will not be allowed to take out more debt whilst in an arrangement
- You must keep up with repayments – If you do not keep up with your monthly repayments, there is a risk you will be made bankrupt
Who qualifies for an IVA?
There is no office guidelines to who qualifies for an IVA. It is a legally binding, Government legislation designed to help all people. Generally speaking, insolvency practitioners (IP) will look at your situation if they think the IVA proposal they submit is beneficial to both yourself (the debtor) and your creditors. This often restricts people to a certain criteria which you will have to meet:
- Over £5000 worth of unsecured debt
- You must have 2 or more creditors of 2 or more lines of credit
- Must live in England, Wales or Northern Ireland
- Must be insolvent
- Must be willing to pay at least £70 per month into their IVA
- Must have some type or types of regular income
What debts can I include in an IVA?
You can include a wide range of unsecured debts within your IVA. These include:
- Credit card debt/credit cards
- Loans/loan debt
- Payday loans
- Council tax arrears
- HMRC debt
- Overpaid benefits
- Gas and electricity arrears
- Overdrafts/overdraft debt
- Water arrears
- Income tax arrears
- Debts to friends and family
- Other unsecured debts
Note: If you are a resident of Scotland, you will need to apply for a Scottish Trust Deed (legally binding). Speak to our advisors for Scottish Debt Advice.
What debts can’t be included in an IVA?
- Secured loans
- Your mortgage (if you still live in the house)
- Car finance (if you still have the car)
- Rent arrears for your current property
- Court fines/Police fines
- Hire purchase arrears (if you still have the product)
- Log book loans (if you still have the vehicle that the debts are secured on)
- Student loans
- Other secured debts
What does I.V.A stand for?
IVA stands for Individual Voluntary Arrangement. It is a formal way to consolidate your debts into one affordable monthly repayment, resulting in the debtor becoming debt free at the end of their payments.
Can I apply for an IVA online?
- Use the IVA Calculator to check your eligibility
- Prepare your IVA proposal and apply for your IVA.
- When your IVA is accepted, your creditors can no longer contact you. Pay 60 low monthly payments.
- After 5 years, you are out of your IVA and completely debt free.
Will an IVA affect my employment?
In most occupations, your credit rating or credit scoring is not a factor and it may never have been checked in the past, it may also be likely that it is not checked in the future either.
There is no law to tell you that you must advise your employer that you have entered an IVA or that you owe money. They will not be notified by your insolvency practitioner. If you wanted to keep it a private matter, in most cases this would be absolutely fine. With some roles such as financial advisors, solicitors or bank workers it may make up part of your contract to advise them of changes like this. In these situations we would advise to inform your employers of your intentions before you enter into any arrangements. This way there will be no nasty surprises for you later down the line. More often than not, we find that your employer would not be concerned by your IVA and that it would not affect your employment status. An IVA is a formal solution and could affect some employments, such as if you were a solicitor or accountant for example. We would always recommend that you receive approval from your employers that your job isn’t affected before you sign up for anything.
Will an IVA impact my partner?
There are certain situations where you may not want to involve your partner at all in your IVA proposal due to personal reasons. Insolvency Practitioners are very aware of these circumstances and can operate solely via telephone and email and at your convenience, so rest assured that your matters can be kept completely private.
If the debts which you are looking to place into your IVA are in joint names, then this would be different. Your IP would look to place all of your debts into an IVA, including joint debts therefore you would have to inform your partner of your plans.
If your debts are solely yours, then there would be no negative impact on your partner, their credit score would remain unaffected and they would not be entered onto any registers or be tainted in any way.
Will an IVA affect my credit score/credit file?
Whilst you are in your arrangement, you will not be able to get any credit. An IVA will stay on your credit file for 6 years, so 12 months after a typical IVA. When this time has passed and your monthly payments have ended, you will be able to rebuild your credit rating.
What proof will I need to apply for an IVA?
- Proof of ID – Passport/driving license/birth certificate/utility bills/national insurance identification/credit agreement
- Bank statements – 3 months bank statements with all transactions displayed
- Proof of income – 3 months payslips/P60/proof of benefits
How long does it take to set up an IVA?
Your initial call will only last around 5-10 minutes. The IVA process will be explained to you and you will be told what further information you will need to provide to proceed with your IVA proposal. Once you have returned the required information, an IVA will usually take between 7-14 days to get into place. You will be protected from creditors within this time, your advisor will provide you with documentation via email.
How long does an IVA last?
Most IVA’s will last for a length of five years. The i v a will remain on your credit file for a period of six years and is placed on the Insolvency Register for that period. You can work out what date it will be removed from your credit file, it will be six years from the start date of the IVA term. So if the IVA started on 1 January 2000, it should be removed from your credit file six years from that date, which would be 1 January 2006. When you apply for an individual voluntary arrangement your Insolvency Practitioner (IP) will tell you if you qualify for an IVA, how long it lasts, how much it costs and provide you with any other debt advice which you may need.
How much will debt advice cost for an Individual Voluntary Arrangement?
The advice cost for individual voluntary arrangements is free of charge. Your I.V.A company will tell you if you qualify for an IVA. They will talk to you about your different debts, provide you with free debt advice and check if your creditors are likely to approve your proposal for your IVA for debt.
How does an IVA affect your life?
By taking out an IVA you may affect your overall financial position. You will not be allowed to take out credit for 6 years. You will struggle to get a mortgage or remortgage your existing property. It also may affect any future increase in earnings or windfalls you may receive, as these will need to be paid to your insolvency practitioner. Your insolvency practitioner will take control of your debts for this period, they will deal with all of your creditors and this is legally binding. That means you will not be allowed to take out any more debts whilst in the IVA.
Once the plan is completed, any debts which you accrue will be managed by yourself. Your ability to take out further debts in the future will not be impacted once the IVA has completed.
What is the IVA protocol?
The I.V.A protocol is a voluntary set of guidelines which your Insolvency Practitioner (IP) can sign up for which improves the efficiency of Individual Voluntary Arrangements. When you apply for debt advice, it is important that you understand the steps of the debt solution, so you can decide whether or not the solution is the best one for your circumstances.
How do I know if creditors will accept my IVA?
Generally speaking, most creditors will approve voluntary arrangements for unsecured debt. But some debts can not be included within one formal debt solution. Your Insolvency Practitioner will tell you how likely it is that your creditors will be willing to accept your proposal, based on the voting creditors.
Can I pay in one lump sum?
There are occasions when you may be eligible for a debt solution which is payable in a one off lump sum as a final settlement to your creditors. This is usually when the money is being gifted from some one else, or you have received inheritance or a windfall for example. With a one-off lump sum payment, the advice is usually the same as when you normally apply for an IVA. You wouldn’t have to make regular payments into the solution, your IP can provide you with more advice on one off lump sum solutions for your debts. Your IP will provide you with more advice on the debt IVA and explain what is IVA to you.
Who regulates the debt industry?
At present the debt industry is not regulated. Some Insolvency Practitioners offices choose to sign up to the Insolvency Practitioners Association (IPA) or register with the Financial Conduct Authority (FCA). You can contact the IPA using the contact details or email address on their website. Your creditors do not regulate the debt industry and your creditors will not be able to impact any decisions which the IPA or FCA make. In our experience, the regulators will take assertive action on any advisers or businesses which do not comply with their strict codes of practice. To check if a person is regulated by the FCA, enter their name into the search box in the FCA website.
Should I use a debt charity?
There are thousands of companies which provide debt help in the UK. You may be looking for an alternative to a private company. You should know that “charities” usually pass their fee charging products to sister companies which charge fees and disbursements, just like private companies. So what you initially thought was a good option, on further analysis could be different to what you originally thought. Charities do have their part to play though. They can help you if you have a problem with your bank accounts, maintenance arrears, living costs, credit reference agencies, child support arrears, bankruptcy, assets, accountancy issues, mortgages, creditor issues, insurance providers, mobiles, your bank account, rates arrears, PAYE contributions or if you want to work out your expenditure. They can make sure that you speak to an adviser or supervisor and look at proposals to offer your lender. A petition has started with the possibility of a debate in parliament about how charities represent themselves and their services.
Which charities help with debt?
You can contact Money Advice Service, National Debtline, Step Change, Shelter or a combination of the three. Charities are particular useful for a low debt level under 1,000. If the debt is high (such as a debt value of 10,000 or more) you would usually seek an assessment from a professional adviser. If you do decide to use a charity to guide you, make sure you check their charity number and the registration number on their website to make sure you are content that their team can answer your questions in the right ways. A lot of clients of charities have a minimum debt level which does not meet the basis for an IVA, so you could always chat to a charity that is happy to act on your behalf for low debt levels.
Although an I.V.A could be the answer to your debt problem, it’s important to understand the monthly payment so call us on our free phone number. Anyone customers can receive expert feedback on their rights from debt charities, if they can’t help they will usually point you in the director of firms which help with IVAs.
We are homeowners, will lenders see my proposal differently?
In some cases yes. In the majority of cases, if you are a homeowner you will not need to remortgage or take out any additional finances that will effect your property. You will need to sign a additional restrictions which remove your ability to take out additional credit tied to your property, which is something that is restricted once you are in an i.v.a. There are exceptions to this, such as when you have a lot of equity in your property/properties. If you own half of a property and another party owns the other half, only your equity will be affected.
If you are landlord and you are in a position of equity, your IP may review your trading position or business to make sure the figures in question are in order. This is usually the case if you have two or more properties, as sometimes the equity can be used to form a repayment to your creditors. But this usually depends on the amount of value built up in your properties.
Banks and building societies will not change the terms of your mortgage as long as a contribution is still being made for the duration of your arrangement. Your mortgage payments will be added to your expenses and accounted for within your budget, as long as you can provide evidence that you can afford to continue to make payments into your mortgage for duration of the plan.