What is an IVA?
Individual Voluntary Arrangements are an alternative to bankruptcy and the formal alternative to using a debt management company or consolidating your debts. An IVA is effectively a contract between you and your creditors to pay back as much of your debt as you can afford over a specified period of time. If payments are being made out of income, this is usually five years. Alternatively if a lump sum contribution is to be made available by a family member or friend, it may be that a one-off payment is all that is required.
Is an IVA a loan?
No. An IVA is not a loan. It is a process whereby your available assets and disposable income are used to pay something (usually not the full amount due) to your creditors in return for the discharge of any remaining balance.
Is an IVA an accepted and Government approved solution?
Yes. In the last few years the IVA process has become the recognised and prevalent method for individuals seeking to deal with their financial difficulties in a responsible way.
Is an IVA a Legal Process?
Although the IVA is a legally binding agreement it is not subject to a legal process in the same way that a bankruptcy is.
Is an IVA a process that requires court involvement?
No, there is no need to have court involvement to set up an IVA.
When should I consider an IVA as a solution for Debt Problems?
In very general terms an IVA may be an appropriate solution for your debt problems where you have some assets and / or disposable income to enable some payment to your creditors, but the level of assets and / or disposable income are insufficient to enable payment in full at this time or in the foreseeable future.
What am I committing myself to if I sign an IVA?
An IVA is a legally binding agreement between you, your Supervisor and your creditors. You are agreeing to make an agreed contribution towards your outstanding creditors. Failure to co-operate with your Supervisor or to adhere to the terms of the IVA is a serious matter which will be dealt with by your Supervisor accordingly and may lead to the failure of your arrangement.
Who can enter an IVA? / Can anyone enter into an IVA?
Yes, if you are resident in England, Wales or Northern Ireland.
Can I enter into an IVA if I already have CCJ's?
Yes. You are not excluded from this solution if you have CCJs.
Can I still do an IVA if one of my creditors has began recovery proceedings against me?
Yes, you can even commence an IVA right up to the day before a bankruptcy petition is presented to the court and also after you have been made bankrupt. Although if you believe you are in financial difficulties and are receiving threatening letters from your creditors it is more beneficial to take action immediately.
Can anyone propose an IVA? Do I need a minimum level of debt?
Usually an IVA is only likely to be suitable if your debts (excluding any mortgage) total at least £15,000.
Can I settle my debts for less than I owe using an IVA?
Yes. The level of funds paid to your creditors will depend on the funds collected during the period of your IVA. The most important thing is that you make your best efforts to make available funds to your creditors. This will depend on your monthly disposable income after your necessary expenditure and any available assets.
Does an IVA cover all of my debts?
The arrangement is only binding upon your unsecured creditors, for example your credit cards, personal loan, bank overdraft etc. Creditors who hold security over any of your assets (e.g. your mortgage or hire purchase on your car) are not prevented from enforcing that security by taking possession of the secured property. You should therefore continue to pay and co-operate with all secured creditors to the best of your ability.
What is the difference between a secured debt and an unsecured debt?
A secured debt is one where the lender has taken security over one or more of your assets to protect itself in the event of default. The most common example is a mortgage over your home where the lender has specific recourse to your home in the event of default. In the case of unsecured debts the lender does not have specific recourse to any of your assets.
Do I need to be a homeowner to enter an IVA?
No.
Is it possible for me to enter an IVA even if I have no assets?
Yes. It is possible to enter into an IVA where you make contributions only from your disposable income.
I have no assets or disposable income but a member of my family is willing to provide funds to enable a payment to creditors. Can I enter into an IVA?
Yes. It is possible to enter into an IVA where the only contribution is from a third party, such as a member of your family or a friend.
How important is it to seek advice early?
The non-objection to your IVA proposal by your creditors can be dependent upon the speed with which you act once you recognise that you are, or are about to be, in financial difficulty. It is important that you seek appropriate advice as early as possible.
How long does it take to set up an IVA?
The setting up of an IVA takes an average of 6 weeks.
How can I help my IVA to be put in place as quickly as possible?
You can help to shorten the time required to put the IVA in place by providing information and duly signed documentation to your Nominee as quickly as possible.
What is the first step in the process?
The first step is usually a brief telephone discussion to answer any questions which you may have and to establish a basic understanding of your financial position in order to make an initial determination as to your suitability for an IVA.
Will I need to take time off work to do an IVA?
No. There is no need to take time off work in order to set up an IVA. A lot of the information can be obtained from a telephone call and you making available back up documentation.
What kind of information will i need to provide if i enter an iva?
You will be asked for various pieces of information and documentation to be sent by post or courier to the Nominee's office. This information and documentation will include details / statements / letters from all creditors, recent wage slips, details regarding any property, vehicles, insurance polices or any other assets you may have.
What information is required in relation to my debts?
You need to provide details of all of your debts both secured and unsecured. These will include bank loans, credit cards, store cards, council tax etc. You will also need to provide a recent statement or alternatively details of account numbers, where possible.
What information is required in relation to my assets?
You need to provide details of all of your assets. These will include property, both at home and abroad, life insurance policies, vehicles, savings or bonds etc. You will need to provide details of the value of each of the assets and any debts secured on them.
What information is required in relation to my income and expenditure?
The nominee is required to assess your income and expenditure in order to determine whether you have a disposable income that may be used as a contribution to your creditors. It is important to note that an IVA can be based on disposable income only, assets only, or a combination of both.
Will I be credit checked before acceptance?
No. The signing of an IVA is not subject to any credit check.
I have heard that I need to make a proposal to the creditors. What does this mean?
A proposal will be formulated by the Nominee from all the information you provide regarding your assets, debts, income and expenditure. This proposal will outline to both you and your creditors the funds that will be made available to the IVA and how those funds will be distributed amongst your creditors.
Do I need to disclose all of my assets and debts in the proposal?
An IVA proposal must include all available information to allow your creditors to make an informed decision as to whether they should accept your proposal. An IVA can only proceed with your creditors agreement and must, therefore, be as sound a proposal as possible.
Can one of my creditors fail to vote and cause my IVA to not be approved?
There is no requirement for creditors to vote. If below 25% by value of the voting creditors object , then the IVA will automatically be approved.
What happens if my proposed IVA is not approved?
If, more than 25% of your voting creditors vote to reject your arrangement then you will be back to the position that you are in now. You may decide to petition for your own bankruptcy or seek further help.
Do I have to pay fees if my IVA is rejected?
The terms that we have is that no fees will be charged to you if the IVA is not accepted by your creditors. If your IVA is rejected, which we hope will be unlikely, we may be able to provide other options.
Do creditors have to accept an IVA?
No. The acceptance of any IVA is entirely in the hands of your creditors as a whole. Individual creditors may object but, unless 25% or more of voting creditors object, your IVA will be approved and all creditors will be bound by its terms.
What way does the voting work?
For an IVA to be approved all you require is greater that 75% of the voting creditors to accept your arrangement and it will be binding on all your creditors. For example if you have a total value of unsecured creditors (i.e. excluding your mortgage, HP etc) of £30,000. Say £7,600 worth of creditors vote to accept your arrangement, £20,000 do not vote and £2,400 do not accept your arrangement. Then your IVA is accepted and binding on all your creditors, including the £20,000 that did not vote and even the £2,400 that did not accept your IVA.
Will interest and charges be frozen while the IVA is being set up?
The date on which the IVA is approved by your creditors is the date at which all charges and interest must be frozen by your creditors.
Are creditors bound by the terms of the IVA or will creditors still be able to take action against me for recovery of their debt?
Assuming the IVA is approved, all creditors including those who did not vote and even those who voted against your IVA will be bound by its terms and will be unable to take further action against you.
Can a creditor take recovery action before the IVA is approved?
Yes. Any action which has been raised by a creditor prior to the approval of the IVA can continue. Once the IVA has been approved, your creditors cannot raise any further recovery action.
Can those creditors who do not accept the IVA take action to recover their debts?
No. Provided the IVA has been approved, such creditors will not be able to take further action against you to recover their debts.
What obligations do I have once the IVA has been approved?
Once your IVA has been approved you are bound by its terms and those of your individual proposal. An IVA is a legal document that binds you, as well as your creditors, to its terms. Failure to comply with those terms can result in failure of your arrangement.
What do I have to do if my financial circumstances change during the period of the IVA?
It is Vital that, when requested to, you provide the supervisor with updated information regarding your income and expenditure. Any information regarding a change in your circumstances i.e. a change of employment, salary and any changes with regard to any of your assets must be notified to your supervisor immediately. All of these areas dictate how your IVA proceeds.
Can I cancel the IVA once it has begun?
No. Once an IVA has been approved you cannot withdraw from its terms or cancel it. If you default on the terms the IVA will be failed.
How much does an IVA cost?
There is no additional cost to you. The fees and outlays of the IVA are paid from funds gathered from either your monthly contributions or if you have decided to realise some assets.
Who needs to know about the terms of the IVA?
Your IVA is private and confidential between you, your nominee/supervisor and your creditors.
Do I need to tell my partner?
You are not obliged to tell your partner unless you owe him/her money, although it is recommended that you do so where there are joint assets or joint debt.
Do I need to tell my employer?
You are not obliged to tell them unless you owe them money
Can I change jobs whilst in an IVA?
Yes. You can change your job while in an IVA, but you must remember to tell your supervisor of any changes in your circumstances.
Do I need to tell my Landlord?
You are not obliged to tell them unless you owe them money.
Will my IVA be Public information?
The approval of your IVA will be recorded in the Insolvency Service Register which is available for inspection by the public.
Will my IVA be printed in the local newspaper?
No. There is no requirement to publicise either the fact that you have entered into an IVA or the details thereof in any local newspaper.
Will the calls from creditors stop when I enter into an IVA?
The signing of an IVA allows the Nominee to act on your behalf in relation to all known creditors and this will, in time mean the cessation of calls and letters from your creditors. Any further calls and letters you do receive should be passed on to your nominee's office to deal with on your behalf. All creditors at the date you sign the IVA will be informed of your course of action as quickly as possible. There may be instances where the creditor sell's/ passes your debt onto a debt collection agency who may not have been informed by the original creditor of your IVA, and you begin to receive calls/ letters from companies you do not recognise. Again, you should refer these companies to your nominee's office to deal with.
What do I do if a creditor contacts me and asks for a payment during the IVA?
You should not make a payment to any creditor included within the IVA. You should advise your supervisor of the contact made.
What about Joint debt, is that included?
Joint debt may be included in an IVA but you must be aware that if only one of the joint debt holders signs an IVA the relevant creditor can pursue the other joint debt holder for the full amount of the debt, regardless of its inclusion in the IVA.
Can I include my child support in my IVA?
No. The only unsecured debt that cannot be included is money owed to the child support agency, the Department of Works and Pensions and similar government bodies.
Can I include taxes in my IVA?
Yes, any tax liabilities such as PAYE, VAT and National Insurance can be included in an IVA.
What happens to interest and charges?
All interest and charges on your debt are frozen at the date of approval of the IVA, although it may centime to accrue while the IVA is being set up. Any claim made by the creditor must be for the amount sue to them at the date the IVA was approved by your creditors.
I have heard that I will be discharged from my debts, what does this mean?
The best way to explain this is by example, If you owe a creditor £10,000 at the date you sign the IVA and they are paid £3,000 by your supervisor out of the funds contributed, you will be discharged from the remaining £7,000 by that creditor.
When will I be discharged from my debts?
So long as you have complied with the terms of the IVA, you will be discharged following the end of the IVA period, normally five years, but this can be considerably less depending on the terms of your IVA. In practice actual discharge is normally some months later when the creditors have received their dividend payment.
Will I lose my house doing an IVA?
No, the creditors will require you to raise some funds from your property by way of re-mortgage only if you have sufficient equity available.
I own a holiday property overseas; do I need to include this in my IVA?
Yes, all assets you own (other than household items) need to be included in the IVA.
Can I rent an apartment while in an IVA?
Yes, there is nothing to stop you from renting a property whilst in an IVA.
What would happen if I was renting a property and during my IVA the opportunity arose to buy a property by way of mortgage?
As long as your monthly payments figure was not greater then your monthly rent then there should not be a problem. You must also consider if you decide to Purchase a house, that the costs of running that house should not be greater than those of your rented property.
Will I lose my car if I enter an IVA?
No, not necessarily. The value of your car and whether you need your car to allow you to work, will determine whether you may keep the vehicle.
Can I transfer my car to my partner before an IVA?
No, any assets transferred to any party in the five years prior to the signing of the IVA can be challenged by your nominee.
Can I lease a car while in an IVA?
It is possible to lease a car whilst in an IVA provided your ability to meet your monthly contribution is not affected.
What other assets may be included in an IVA?
Any assets other than essential household items may be included in an IVA. The most common types of other assets are financial, for example cash, shares, and insurance policies which may be surrendered. So long as the asset is not an essential household item and can be readily converted into cash, it may be included in the IVA.
Can an asset of a member of my family be included in an IVA?
With their permission, yes. It is possible to enter into an IVA where the only contribution is an asset (usually cash) from a third party, such as a member of your family or a friend.
What if my circumstances change?
If any circumstances change, it is in your best interests to tell your supervisor as soon as possible.
Will I have to provide updates about my financial situation while I'm in an IVA
You will be required to provide an updated income and expenditure form along with your payslips for the year to your supervisor on an annual basis.
What happens if my job status changes while I'm in an IVA and I can't make the payments?
The key thing to remember is to communicate with your supervisor. Let them know what has happened as soon as possible. Depending on how long you are out of work it may be possible to suspend your payments until such time you obtain further work.
Can I end my IVA early if I win the lottery?
Yes, if you win enough, you will need to pay all creditors in full, including statutory interest at 8% per annum. If you do not win enough to pay in full, we could modify your arrangement and offer the sum you have won in full and final settlement. This would be subject to acceptance.
I think I might get a big inheritance next year, would I lose this is I was in an IVA?
Unfortunately, yes. Any additional assets you acquire during the IVA period must be paid to your supervisor for the benefit of your creditors.
When the IVA is approved when do my monthly payments begin?
Your first monthly payment will be due prior to the approval of your IVA. The second payment will be due one month from the date of approval of your IVA and subsequent payments on the same date monthly thereafter.
How can my employer find out if I do an IVA?
You are not obliged to tell your employer unless you owe them money.
What happens if I just stop paying into the IVA?
If you stop paying into your IVA, your supervisor will fail your arrangement and if stated in your proposal and there is sufficient funds, will petition for your bankruptcy. Otherwise your creditors will be free to take their own action.
What can happen if I fail to co-operate with my supervisor?
Failure to co-operate with your supervisor is a serious matter, which can result in your arrangement being terminated and your supervisor petitioning for your bankruptcy.
Can I skip a payment whilst in an IVA?
In certain circumstances you may be able to skip a payment; however any missed payments will need to be collected at a later date.
What happens if I am made redundant and am making income payments?
If you come across any problems such as redundancy or missed payments in an IVA, it is important that you contact the supervisor of the IVA as soon as possible. He will be able to offer you solutions and advise you on actions you could take. The typical reason for failure of an IVA is that you ignore correspondence from your supervisor. There is a solution for everything.
Can I act as a director of a limited company?
Yes, signing an IVA does not automatically stop you from being a director, however it is advisable to check the company's articles of association as there may be restrictions in them.
What jobs might I be excluded from if I do an IVA?
This depends on each individual employer and it is the sole discretion of your employer as to whether you are allowed to continue to be employed for the company.
Can I hold other public offices?
Yes, unless there are any specific rules which stop you from holding office.
Can I apply for credit while in an IVA?
No, you cannot apply for further credit.
If I enter an IVA can I still have a Switch/Solo/Maestro, as I need one for work?
Yes, the only stipulation for the IVA will be that you do not obtain any further credit. The supervisor will only have a problem if you become overdrawn.
Will the singing of an IVA result in my being Blacklisted by credit reference agencies?
Yes, you will be blacklisted. Your nominee is not obliged to advise the credit reference agencies however your creditors may.
Will the signing of an IVA affect my credit rating?
Yes, your credit rating will be affected prior to the signing of the IVA if you have made late payments or missed payments to your creditors. Your creditors may also contact the credit reference agencies to advise that you have signed an IVA and request that this be noted on your credit file.
How long will the IVA impact my credit?
Defaults on your credit agreements prior to the IVA will remain on your credit reference file for 6 years.
After the term of the IVA, when completed successfully, how will my credit rating stand?
Creditors are not obliged to update your credit file if they are paid less than 100 pence in the pound and in this case the defaults will remain on your credit reference file for six years.
What are the Advantages of an IVA?
The main advantage is that you as an individual who takes steps to sign the IVA, once you have recognised you have a problem, therefore there is greater element of control.
What are the disadvantages of an IVA?
You may find it difficult to obtain credit in the future.
Is the IVA the most or least effective tool to use to deal with problem debt?
An IVA can be very effective in dealing with debt problems, however its effectiveness does depend on your individual circumstances and you should explore the other options.
What other options do I have?
Whilst an IVA is an effective debt solution for many people, it is not always the most viable option for both you and your creditors. If you are advised that an IVA is not suitable, the advisor should explain the other options available such as Bankruptcy and Debt Management Plans.