Your advisor will discuss your options and circumstances with you to establish the facts of your case. The more detailed the answers you can provide, the quicker your advisor will be able to work to set up a solution for you.
Yes, as long as the debt was taken out before the date of approval.
Secured debts are tied to an asset, such as a property, which the lender will seek to claim if regular payments are not maintained. Your property may be a risk if you do not maintain repayments on these debts.
Unsecured debts are not tied to an asset and will form part of your arrangement, all payments to these debts will cease upon acceptance of the Insolvency arrangement.
Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others.
An IVA (Individual Voluntary Arrangement) is a formal debt solution that acts as an alternative to bankruptcy and allows a person with debts above £10,000 an opportunity to agree reduced payments with their creditors for a fixed term, which is normally 5 years.
It may be an appropriate option for you if you can’t keep up with the contractual payments you agreed to when you took the credit out.
With an IVA, you would agree a new monthly payment with your creditors – one that meant you could afford all your other essential outgoings as well. You’d pay this single lower amount for five to six years and, after this time, if everything has gone according to plan, the rest of your unsecured debts on the IVA would be written off.
You only have to pay an agreed percentage of your debt back. You will still be paying part of your debt back with an IVA which will be a higher amount than creditors are likely receive in bankruptcy.
You will be free of debt in a set time. In an agreed number of years, you will be debt free and able to get on with your life.
Your creditors will stop calling. Once enough of your creditors agree to it – at least 75% in value of the creditors that vote must do so – an IVA is legally binding. That means they cannot take any further legal action or contact you to demand payment.
You won’t have to sell your home. However, you could be expected to re-mortgage and free up some equity for your unsecured creditors – our advisers can explain this in more detail.
It’s affordable. Your monthly IVA repayments will depend on your specific income and outgoings, meaning it will be an amount you can afford each month.
The contractual interest and charges on your unsecured debt will be frozen, so you can get on with making payments.
If you’ve been feeling down and anxious about your debts for a while, that worry may have taken it’s toll on your outlook on life and your relationships. An IVA can, in some cases, make a real positive difference to your life and your partner’s life, as you’ll both know the debts are being taken care of.
An IVA will also allow you to work towards a date when you’ll be debt-free. If you have any big plans with your partner, like buying a house or saving to go traveling together, it can help to know when your debts will be dealt with so you can focus on your joint goals in life.
Provided the terms of the proposals have been fully carried out, your creditors will have no further claim against you and the balance of any unpaid debts is written off. You will be provided with documentation to confirm that you have satisfactorily completed the IVA and a report will be sent to your creditors.
An IVA can only deal with unsecured debts, such as bank loans, credit cards, store cards and overdrafts.
No, you must be technically insolvent. There are two basic tests of insolvency:
1. Your liabilities (debts) are greater than your assets
2. You are unable to pay your debts as they fall due for payment
If both these conditions apply to you, then seek professional advice as an IVA may save you from Bankruptcy.
We'll ask you for some documents to support your IVA application, which include a bank statement, wage slip and statements of your debts.
Ideally you need a recent statement or letter for each of your creditors confirming the balance owed.
You will need to prove your income with your last three months wage slips and if you get Tax Credits your latest statements. If you are self employed a copy of your latest tax return will be required.
You will also be asked for your last three months bank statements and a copy of your rent agreement or latest mortgage statement if you are a home owner.
The proposal must be accepted by at least 75% of your creditors, in debt value terms, before the IVA can be deemed to have been accepted and, therefore, become legally binding on all of your creditors.
If you live in Scotland the equivalent solution to an IVA is a Trust Deed.
If over 50% of your creditors, who own over 33% of the debt, agree to it then your Trust Deed will become protected. This means it will be a legally-binding agreement.
No. The arrangement takes the form of a contract that is legally binding.
One of the key components of this is that your proposal of repayment is handled by a Nominee and the ongoing maintenance of the payment schedule is the responsibility of a Supervisor (both offices must be held by a licensed Insolvency Practitioner).
In most cases the same Insolvency Practitioner will fulfil both of these roles.
If you can’t make a payment to your IVA, you must let your IP know as soon as possible.
Your IVA agreement will allow you a short payment break if you have an emergency. You may also be able to alter your monthly payments with the agreement of your IP if the change is small.
If you need a longer payment break, or your situation has changed a lot, your IP may need to contact your creditors to agree the changes.
If you don’t speak to your IP about missing payments you may be in breach of your IVA terms.
Any payments you miss will be added to the end of the IVA. This means that missing payments will lengthen the time it takes for your IVA to complete.
An IVA will affect your credit rating as it will stay on your credit file for six years after the date of commencement (typically one year after your IVA has been completed).
However, if your financial situation is so severe that it requires you to enter an IVA, then obtaining additional credit would only make your situation worse.
Your monthly IVA payments will take all your monthly livings costs into account, which means you will not need to obtain any additional credit (other than in exceptional circumstances).
Having an IVA will not usually affect your job. But if you are in certain professions, such as solicitors and accountants, having an IVA may mean that you can no longer practice, or may practice only subject to certain conditions.
Starting an IVA will not affect your ability to continue to live in a property you are currently renting. Your landlord will not be told and your negative credit rating will not affect your landlord’s property.
Under an IVA it's very unlikely you'll have to sell your home. However, depending on the amount of equity in your home, you may have to remortgage six months before the end of your IVA to release equity. This will then be paid into your IVA.
Your IVA could affect your partner, but whether it does or not and how much depends on your circumstances.
It’s possible that your IVA will have an effect on your partner’s credit history if you have any joint financial accounts. There is sometimes a way around this if you apply for a Notice of Disassociation.
Technically, there is no such thing as a joint IVA but it is possible to link two IVAs if both you and your partner have debts and live at the same address.
To arrange an IVA, you have to put something called a proposal together for your creditors that shows them your income, expenditure and how much you would be paying towards your debts on the IVA. You’d have to put forward a linked proposal if you wanted linked IVAs, and both would have to be approved for it to go ahead.
Going ahead with linked IVAs would mean that personal information about your debts as well as notes of the conversations you’ve had with your IVA provider would be available to your partner and you’d have access to theirs. You’d just need to make sure that you were OK with this before you went ahead.
It is possible to go on an IVA if you have joint debts with someone, but when the debt is written off at the end of the IVA it would be written off for you and not your partner.
When you take out joint credit, you both become equally responsible for all of the debt - not half each. So, even if the debt is written off for you, the creditors would still chase the other person named on the agreement for the outstanding amount.
If you’ve had an increase in your income due to a recent pay rise or for any other reason you will have to inform your Insolvency Practitioner (IP) and your disposable income will be reviewed. If this has increased then it is likely that your monthly payments will also increase.
As an incentive for you to try and improve your ongoing income if you can you will not have hand over all of the amount your disposable income has increased by. Your IVA payment will only increase but by 50% of the increase in your disposable income.
If you take a cut in pay meaning your disposable income reduces it may be possible for your IVA payments to be reduced. However, this does not happen automatically and it will depend on whether your new payments will still be sufficient to return a realistic amount to your creditors
Your IP will review your new income and expenses budget. If your disposable income has reduced by less than 10% then they can authorise a reduction in your payments without discussing this with your creditors. If the reduction is more they will have to ask your creditors to agree this in a formal variation of your IVA.
Your creditors may agree to a variation reducing your monthly payments. However, they will normally also insist that the number of payments you make is extended by up to 12 months to compensate.
If you lose your job during an IVA the outcome will really depend on how likely it is that you will be able to get more employment and when this will be.
If you expect to get a new job in a reasonable period of time then it may be possible to take a payment holiday for a few months. Any payments that you miss will be added on to the end of your Arrangement.
If you get another job but it pays less then again it may be possible to pay less on an ongoing basis but only if the payments are not too low for your creditors to accept. If your pay has reduced so much that it is impossible for you to continue to make any reasonable payments or you are unable to get a new job then the Arrangement could fail.
What happens next will depends on how far into the agreement you are. If you are nearing the end and have already made most of your agreed payments, it may be that your IP is able to come to an agreement with your creditors so that they accept what you have already paid as full and final settlement and the IVA will be completed.
The majority of high street creditors have come to accept that 5 years is the standard length of an IVA. However, there are instances where they can demand that the agreement lasts for a longer period.
A bank which often requires IVAs to be extended is NRAM (formally known as Northern Rock). They will normally require the Arrangement to last for 6 or 7 years.
Usecured debts owed to NRAM are generally loans which were lent as part of a”Together Mortgage”. The loan was repayable over the same time as the mortgage. As such they are reluctant to settle for payments of just 5 years.
If one of your creditors demands your IVA lasts longer than 5 years you can refuse. However depending on how much you owe them this may mean that the Arrangement is rejected.
It is possible to settle a monthly payment IVA early after it has started. This is achieved by paying a cash lump sum instead of the remaining payments. The agreement is then settled in full.
Paying early using a lump sum can normally be carried out at any time during the agreement. The creditors should accept slightly less than they would otherwise receive if the monthly payments had been made.
The cash sum must come from a third party. It is usually not possible to use a windfall you have received personally. This would have to be paid into your IVA in addition to your ongoing payments.
Please note, however, that your IVA will not be paid any quicker if you increase the amount of your monthly payments. If your circumstances improve your payments may increase but this simply means the amount you pay will increase overall.
If you've got a debt management plan (DMP) or IVA, you may find your creditors are still contacting you or asking for payment, even though you're making payments they've agreed to.
They may be contacting you to send you regular account statements, in which case don't panic, as this happens even when you're in a DMP.
They may be chasing you for debts not included in your DMP, as a DMP won't pay off all your debts. Your priority debts, such as mortgage arrears or court fines, can't go into a DMP. You need to make arrangements to pay these debts first and still need to deal with these creditors yourself.
Sometimes a creditor will refuse to deal with a DMP provider. This could be because the creditor doesn't want to accept the reduced payments or sometimes it could be because they've objected to you using a fee-charging provider. If this applies to you, ask the creditor why they're not willing to co-operate with the DMP. You can try to negotiate with them yourself to see if they'll change their minds.
If your creditors are calling because you haven't had a DMP for very long or the creditor has made a mistake because they haven't updated their records, explain the situation to them and remind them that they've agreed to the DMP.
While a creditor is still allowed to contact you while you're in a DMP, if one is doing any of the following, it may count as harassment:
• making demands for payment in a way that is deliberately meant to alarm, distress or humiliate you, your family or your household, such as turning up on your doorstep threatening to take goods if you don't pay
• contacting you too often or late at night
• contacting you through Facebook, Twitter or other social networking sites
• pressuring you to sell property or take out more credit to pay your debt
• using more than one debt collection company at the same time or not telling you when your debt has been passed to another company
• producing any document which looks like it's official when it isn't, or making false claims that a document is official when it isn't
• pressuring you to pay in full or in large instalments that you can't afford
• making threatening gestures or statements.