IVA FAQ

Can I protect my house?

An IVA prevents creditors from taking action against you and your property. However, before the end of the IVA it may be necessary for you to introduce a sum of money into the arrangement in place of a proportion of your share of equity in your property. This is normally done by remortgaging your property. If remortgaging is not possible, you may be able to extend the arrangement for a further twelve months during which you time you pay additional contributions in place of equity.

How do the IVA fees get paid?
As soon as you decide to proceed with an IVA then your payments to creditors cease and contributions towards your IVA start. These will be set at a figure which you have agreed you can afford. It takes around 6 - 8 weeks to set up an IVA.

Example : 60 monthly contributions of £300 = £18,000.

Any contributions you pay prior to approval of your arrangement will form part of the 60 contributions you will have to make into the arrangement.

Fees are discussed with you and agreed with creditors. These fees are billed on a monthly basis, paid out of money that has been collected from you and form part of the expense of your arrangement.

Do I need to open a new bank account?
Yes, if you have debts with the same bank. Creditors have the right of set-off, which means they can take your wages to "set-off" against other monies owed to them. If you are not overdrawn and do not have loans or credit cards with your bank then you do not need to open a new bank account.

Open a bank account with no overdraft facility. Creditors will generally insist that you do not incur future credit which includes allowing your bank account to be overdrawn.

Is my IVA likely to be approved?
Yes, an IVA would not be recommended as a solution if it was not thought that it had more than a reasonable chance of being approved. It would be unfair to you and a waste of everybody's time and energy. Creditors will expect your proposals to be “your best affordable offer”.If it is thought that creditors will not accept your proposals then it should be discussed with you prior to it being presented to them.

However, if the IVA is not approved you can put forward other solutions to your creditors including debt management and also bankruptcy.

How does this affect my credit rating?
An IVA will be on your credit record for six years which is the same length of time as any other adverse credit is recorded.

Will I still be able to obtain credit?
The IVA proposal normally states that you can only get credit if your Supervisor allows you to do so. This does not normally apply to individuals in business who can demonstrate that they need credit to be able to continue trading.

Will my creditors stop contacting me?
Yes, once your IVA is approved all further contact from creditors should cease. It may take a while for creditors to amend their systems but within 1 to 2 months of the IVA starting, all communication from your creditors should stop. Creditors are legally bound into the terms of an IVA, consequently preventing them from pursuing you for the debt.

Can my arrangement be brought to an early conclusion?
Yes, a variation meeting can be convened to offer a sum of money in full and final settlement of your obligations under the IVA. The sum of money could be raised by:

1. Remortgaging your property
2. Obtaining funds from a relative
3. Cashing in policies (subject to your getting expert investment advice)

Creditors are likely to agree to accept a lump sum to bring the arrangement to an early end if you can show that you are paying creditors as much as you can afford.

What happens if I can't pay my contributions?
If you find you cannot maintain your payments, creditors can be asked to agree to a reduced payment or a payment holidaybut there must be a good reason for the request. Your IVA proposals will be drafted to include the power to put revised proposals to creditors.

Who gets to know about my IVA?
Unlike bankruptcy your IVA is not advertised in a newspaper. Your employer will not know unless you choose to tell them. Your IVA is however, registered via the Insolvency Service and this may be picked up by credit reference agencies who will note your IVA on your credit reference file.

What are downsides of an IVA?
The payment period for an IVA is normally 5 years unless creditors agree an early settlement. In Bankruptcy income contributions are for a period of three years only. The extra 2 years of contributions with an IVA mean that creditors get a better payout which is why they support IVAs.

You have to make sure that you can afford to meet your contributions. If you fail to pay your contributions, and there is no reasonable explanation for the failure, your arrangement may fail. Creditors will no longer be bound by the arrangement and can pursue you for the full amount of their debt. Failure of the arrangement could also mean that the Supervisor has to petition for your bankruptcy. If you cannot meet your payments through hardship, it is always best to strive to vary or settle the arrangement, rather than fail it.

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