Who qualifies for an IVA? Why would someone choose an IVA? An IVA is time limited, so repayments only have to be made for this amount of time. This works well for people who have a budget they believe they can stick to. If circumstances change e. If an accountant or solicitor gets an IVA, the agreement might prevent them from continuing to work.
Using an IVA may also require a personal pension to be used towards the repayments because it counts as income. How do IVAs affect credit history?
Related Articles What happens to debt when you get divorced? An IVA can be flexible to suit your needs but it can be expensive and there are risks to consider. This page tells you about how an IVA may impact your job, home or possessions.
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. If you are worried about the impact of an IVA on your job, check the terms and conditions of your contract to see if it says anything about continuing to work when you have an IVA.
However, if you own more expensive items, such as antiques or expensive jewelry, you may want to consider selling these to help pay your debts.
Assets are things you own that have significant value, such as a home, land or a car. Assets can be included in the IVA, which means you will sell them and use the money to pay the creditors.
If you decide that an IVA is right for you, your insolvency practitioner will discuss your assets with you and whether these should be included in the IVA or whether you can keep them. You must tell the insolvency practitioner about all your assets. Any assets that you want to keep, such as a car, must be specifically excluded from the IVA. If you don't want to include an asset and the insolvency practitioner doesn't think the creditors will agree, the proposal won't be put forward.
Your creditors could keep asking you for money, for example by calling you and sending you letters. EU creditors still have to sue here in the UK rather than abroad in the EU, even if they have an existing judgment.
Get legal advice if you have creditors in the EU. Find free or affordable legal help. Having an IVA may affect any future income or assets that you receive. For example, if you decide to move house while you have an IVA, any money you make from the sale might have to be paid into the IVA. One you have found an IP, whether through the Insolvency Service or some other way, they will take the lead on setting up an IVA on your behalf, taking into account factors like your debt level, income, credit history, and overall financial situation.
If you decide an IVA is the right debt solution for you, it can be set up relatively quickly — the general advice is that, barring any unforeseen circumstances, your IVA could be ready to go in a period of weeks. Before they begin setting up your IVA, your Insolvency Practitioner may petition your creditors to stop them taking action against you while the agreement is being arranged.
Next, they will take a look at your finances. Your IP needs to know your income so they can judge what people can afford to repay. Next, they will need to know about your debts — how many creditors you have, how much money you owe, and what types of debts are involved. Once your IP has all that information, they will draft an IVA proposal to submit to your creditors, and wait for it to be approved.
In addition to setting up your IVA, you Insolvency Practitioner has a second important function, which is to distribute payments to your creditors during the agreement. Once your IVA is approved by creditors, you will be able to consolidate all your debts into a single monthly amount to be shared.
The Insolvency Practitioner also deals with any fees and charges, and will give you a detailed report of how and when repayments need to be made. The charges incurred by using this process are recovered from the creditors, not directly from you. This means the Insolvency Practitioner will make the appropriate deductions for their services each month before repayments are distributed to your creditors. Changing circumstances are common in an Individual Voluntary Arrangement.
IVA holders can rely on their Insolvency Practitioner should their financial situation changes — either for better or worse. Below are a few of the most common changes people face during an IVA.
Defaulting on payments can hit your credit score hard. If a change in circumstances is going to affect your long-term ability to repay your debt, the best advice is to try to reduce the level of your payments. Again, this is done by your Insolvency Practitioner, who will negotiate on your behalf. You may be able to use a cash injection to make additional contributions to your creditors, or use a lump sum to end your IVA early and kickstart the process of rejuvenating your credit file.
The most immediate cost will be fees or charges for the administration of an IVA. Instead the charges will be included in the regular payments you make each month, and will be deducted by your Insolvency Practitioner before the money is paid to creditors. Using an IVA will also be recorded on your credit report. Your credit report or credit file carries details of your financial situation, including debt solutions, for six years.
So even if your IVA lasts for the usual five years the record will remain visible for a further 12 months — six years since you began the IVA. You can alert them to the completion of your arrangement by sending them a letter to that effect, signed by your Insolvency Practitioner, which you can then share with creditors in future.
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