What is an IVA and what is the process?

An IVA is a legally binding arrangement between you and your unsecured creditors. You agree to a single consolidated affordable monthly repayment typically of at least £90.00 a month over a period of time —usually five years. After that, any unsecured debts you haven’t been able to repay are written off.

Is an IVA right for you?

Before you start the process of getting an IVA the first thing you have to do is make sure that you are eligible and that it is the right solution for you. In terms of eligibility, you must be in England, Wales or Northern Ireland. If you are in Scotland then you need to apply for a Protected Trust Deed instead. Typically, you’ll need a minimum debt level of £6,000 of unsecured debt with at least two lenders to potentially qualify for an Individual Voluntary Agreement. Your debt might be across a number of credit cards, loans, catalogues, store cards, etc.

You must be able to prove you’re struggling with your current repayments in order to be considered for IVA payments.

You also need to look at your own individual circumstances as it might be that a different debt solution like – a debt relief order, debt management plan, bankruptcy or budgeting advice might be better solutions for you.

We recommend talking to a debt specialist like Lauren who can help to give you information on the options available to you so that you can make an informed choice.  Talking with a debt specialist first about your income and expenditure can also help you in the process of setting up a debt solution.

Getting an IVA the process

If an IVA is the right solution for you, the first step is to find an Insolvency Practitioner (IP). As an IVA is a legally binding solution you will need a qualified professional to support you through the process. The Debt Advice Service refer their clients to their associated companies like the Debt Resolution Service who have many years’ experience helping clients successfully get out of debt.

A statement of affairs

If an IVA is appropriate for your circumstances then a Statement of Affairs is drafted based on the information you’ve already provided. The Statement of Affairs is the consolidated view of your current financial circumstances (assets and liabilities) and forms the basis of your IVA proposal.

The proposal (which is usually drawn up by an Insolvency Practitioner acting as Nominee) will also contain creditor details as well as a breakdown of your income and expenditure and any supporting evidence that you may be required to provide (pay slips, bank statements etc). At this stage, your Nominee may also apply for an Interim Order, which is a legal injunction preventing your creditors from taking further action against you until your IVA proposal has been considered.

Meeting of creditors

It’s when your lenders tell your IP whether they agree to the terms you’ve spelled out in your IVA Proposal. These days, it’s not really a meeting – it’s more of a deadline. Some or all of your lenders may already have told your IP what they think about your IVA Proposal.

At the meeting, your creditors will vote on whether to accept or reject your proposal. 75% of the votes (by value of debt) must be in favour of the proposal for it to be approved. If this happens, all of your unsecured creditors, whether they voted yes, no or didn’t vote at all, are legally obliged to abide by the terms of the IVA agreement.

Approval

Once approved, all the relevant parties are informed and a supervisor is appointed (usually this is the same Insolvency Practitioner that acted as Nominee) to monitor monthly payments and make sure you are abiding by the terms of the IVA.

How long will the IVA process take?

The IVA process usually takes about six weeks from start to finish but this is highly dependent on how quickly you can send the necessary supporting evidence to your debt specialist.

To find out more about an IVA contact one of our debt specialists today on 0800 254 5112

The post The Process of getting an IVA appeared first on The Debt Advice Service.

Both are legal processes that can write off some or all of your debt. This means they offer protection from your creditors taking further action against you to recover a debt. However, each of these solutions will affect different areas of your life, so you must think carefully about what’s important to you before deciding which one to take.

Employment:

A debtor’s employment could be affected by either process, but there is a greater chance of an employer becoming aware of their employee’s insolvency if they enter bankruptcy rather than an IVA.

Both an IVA and bankruptcy are included in Individual Insolvency Register but, bankruptcy is also advertised in The Gazette. This means that there is greater publicity with bankruptcy compared to an IVA.

Not all job roles will be affected by either option but there is a greater likelihood of encountering difficulties if you are a senior manager or a director in a business. Some industries where insolvency might cause a problem are:

• Law and property roles
• Finance and accountancy roles
• Pub licenses.

The best way to find out if an IVA or bankruptcy would impact your job is to check with your professional membership body or trade union or ask to speak to your HR department confidentially.

Bankruptcy is more likely to affect your job than an IVA, and in both cases it’s more likely to cause a problem if you work at a senior level.

It’s important to check if your job will be affected, but according to Stepchange most jobs are not.

Will I lose my business with an IVA or bankruptcy?

Bankruptcy for business owners:

This is another situation where you may want to consider an IVA over bankruptcy.  Your business will be shut down if you declare bankruptcy. Any assets your business holds will be handed over to the official receiver, and they will decide what to do with the lump sum raised.

Whether this is a big deal or not depends on what you do and what types of assets are associated with your business.  If, for example, you are self-employed as a virtual assistant and work out of your home office, you may have no major issues starting over, and bankruptcy may work fine.

IVAs for business owners:

An IVA may be a better solution for business owners. Unlike with bankruptcy, your Insolvency Practitioner will have no claim over you company or assets if you decide on an IVA.

Your business will be able to continue trading, your business bank account will remain open, and an IVA allows company directors to remain in their position – so long as you both keep up with payments and continue to take your Insolvency Practitioner’s advice.

How will an IVA or bankruptcy affect my home?

IVAs and bankruptcy will have different impacts on your home, and this will depend on whether you rent or own it.

• If you rent your home during an IVA:
• If you rent your home, an IVA should have no effect, and it’s very unlikely you’ll need to move.
• If your rent your home and go bankrupt:
• If you go bankrupt, you can usually stay in the same property if your rent is up to date.

However, some private landlords include a condition in the tenancy agreement which means you could be asked to leave if you go bankrupt or take out an IVA. You could also lose your home if you have rent arrears when you go bankrupt.

If you own your home during an IVA:

You won’t be forced to sell your home, but you might be asked to remortgage it six months before the end of your IVA. You’ll only have to remortgage if it’s affordable, and if you can’t, you might have to either pay an extra 12 months of payments into the IVA, or raise money from a third party instead.

If you own your home and go bankrupt:

If you’ve got equity in your house it’s very likely that the official receiver (who deals with your bankruptcy) will make you sell it. If there isn’t any equity in it, you may be able to keep it.

However, the official receiver does have two years and three months to decide what to do with it and this means that if the house if it goes up in value during this time you could be asked to sell it.

Getting a bank account

When a debtor enters an IVA and the bank is one of their creditors, the bank may have the ‘right to offset’ their debt against the bank account, if there is a credit balance available. For this reason, it may be advisable for the debtor to open a new account prior to the IVA commencing, so that wages can be paid in and ongoing bills paid.

In the case of bankruptcy, the bank will freeze the debtor’s bank account, so that any credit balance can be claimed by the trustee for the benefit of creditors. This can cause an issue if the account is jointly-held, so it’s advisable for the joint holder to open a new account prior to the bankruptcy procedure commencing.

It may also be preferable for the person entering bankruptcy to open a new account if possible, to ease their own financial management once the bankruptcy order takes effect.

In both cases, a debtor’s access to a new bank account will be limited. Some banks offer basic accounts for those in serious debt, however, allowing money to be paid in but preventing access to credit. You can find a useful article on basic bank accounts and who offer them from the Money Saving Expert.

How long will each take?

Ordinarily bankruptcy is much quicker than an IVA; you will usually be discharged from bankruptcy after 12 months. However, you may have to make payments from your income into the bankruptcy for 3 years depending on whether you can afford to do so. Your home may also be sold in bankruptcy if there is equity in the property.

However, if the Official Receiver or the Trustee in Bankruptcy deems that you have not properly carried out your duties under the bankruptcy proceedings or if you’re found to have acted carelessly or dishonestly you could face the ongoing restrictions of bankruptcy for between 2 and 15 years.

An IVA typically lasts five years – however the arrangement could be extended by 12 months if you have a property and you are unable to release your share of equity for the benefit of your creditors.

Essentially, in bankruptcy you will risk any property or assets but it will be a quicker solution than an IVA.

What do an IVA and bankruptcy have in common?

There are a few things that an IVA and bankruptcy have in common, regardless of which one you go ahead with. They would both:

• Be recorded on your credit file for six years from the date they begin. While this information is on your credit file you may find it difficult to take out any further credit
• Mean that your name is entered on the Individual Insolvency Register. This is an online database of everyone who’s gone bankrupt or been in an IVA or debt relief order. This record is not permanent, and will be removed three months after the solution ends
• Write off your debt. Because an IVA and bankruptcy are insolvency solutions you’ll either get the balance of your debt written off when the IVA is completed or you receive your discharge from bankruptcy
• Mean that you stop getting any further contact from your creditors. IVAs and bankruptcy are formal debt solutions which means that once they’re up and running, your creditors aren’t allowed to contact you by letter or on the phone to recover money from you

To summarise:

Consider Choosing an IVA When …

• You own a home, vehicle, or other assets you can’t bear to lose.
• You own your own business and the requirement that you start over with a bankruptcy would cost you your livelihood.
• You have a job which you may lose if you declare bankruptcy.
• You have power of attorney or are applying for it.

Consider Choosing Bankruptcy When …

• You have no important assets you are afraid to lose.
• You either work for someone else or you are self-employed with a business that is easy to restart.
• You have a job you are not afraid of losing (most jobs are secure even with bankruptcy).
• You don’t have a lot in the way of spare income, or your situation is highly unstable.
• You want things to be over fast so you can start over as quickly as possible.

What to do next:

Research – It is highly important that you make sure you make an informed decision. If you want to know more about bankruptcy  or an IVA then please visit our website https://thedebtadviceservice.co.uk/ or call us on 0800 254 5112 and speak to a member of our team who will provide you with more information on the options available to you.

The post Bankruptcy or an IVA? appeared first on The Debt Advice Service.

When you’re in debt there is a weight on your shoulders, you can feel it affecting every part of your day. So, when there are options to write off your unaffordable debt like bankruptcy or an IVA then these are going to be very appealing and if used may well feel like a weight off your shoulders. But nothing in life is free and there are always things to consider. In an upcoming blog we are going to be looking at the difference between an IVA and bankruptcy. But for today, we are going to look at an IVA and the things that you need to consider before getting one.

Are you eligible for an IVA?

The first and most important thing that you need to consider is whether you are eligible. To be able to take advantage of an IVA you must live in either England, Wales, or Northern Ireland. If you live in Scotland then you need to apply for a Protected Trust Deed, which is very similar to an IVA.

The second thing is that you must owe more than circa £6,000 of unsecured debts to at least two lenders. And you must be struggling with your current repayments to be considered.

Should you apply for an IVA you need to bear in mind that –

• You might not be automatically eligible. IVA’s can be most suitable if you have a regular ongoing income stream and/or a lump sum of money to put towards your debt repayment.
• Your IVA will be approved if the creditors you owe 75% of your debt to are in agreement. If they agree, your IVA will then be applied across all your credit lines, whether other creditors you owe less money to are in favour or not. However, if more than 25% of your creditors reject the IVA your application will be rejected.

To get a good indication of whether you are eligible check out our quick and easy debt tool here.

What are the benefits of an IVA?

The first thing to look at once you know you are eligible is what are the benefits of an IVA? There are some serious considerations when taking out an IVA, so you have to be satisfied that you know the benefits and that they are worth the cost to you.

• An IVA consolidates all your debts to different creditors in to one affordable monthly blanket payment.
• All interest and charges are frozen when an IVA is approved.
• All contact between you and your creditors will cease and be handled by your Insolvency Practitioner moving forwards.
• When your IVA is in place, you’ll receive full legal protection from any further creditor action.
• The fixed term of an IVA is usually 5 years. Any remaining debt will be written off after this time.
• If your situation worsens, your IVA might be altered to reflect any changes of circumstance.

Will the repayments stay the same?

Not necessarily, an IVA lasts for five years and every year around the anniversary of your IVA there is a review into your financial situation and if your financial situation improves you might be required to pay a portion in line with your income. Increases in your living expenses and changes in circumstances are also considered during this review.

If you earn substantial overtime or bonuses. you might be required to pay a portion into your IVA to uphold repayments aligned to your income levels.

What if you are a homeowner?

One advantage of an IVA compared to bankruptcy is that there is no forced sale of your home. In an IVA, creditors are more lenient unless there is enough equity to pay your debts in full. However, you might be required to release equity by remortgaging your property or extend your IVA for 1 year in lieu of equity release.

Additional things you need to know about:

• There will be no upfront fees charged. The Nominee’s fees and Supervisor’s fees are paid from your agreed monthly contribution. If you become able to repay your debts in full, the amount you would pay would include these fees.
• An IVA will stay on your credit report for 6 years from the date of approval, affecting your credit rating and your potential ability to obtain future lines of credit.
• An IVA is a legally binding contract with limited flexibility.
• You can’t get new credit for £500 or more once you enter in to an IVA without obtaining authorisation from your Insolvency Practitioner first.
• Your details will automatically appear in the Individual Insolvency Register. This is a public record of bankruptcies, IVA’s and other forms of debt relief/insolvency.

You can read more about an IVA on our dedicated page here. If you feel an IVA is something that you want to consider then call our friendly team on 0800 254 5112. Or visit our website for more contact details.

The post An IVA – What are the considerations? appeared first on The Debt Advice Service.

So, if you’re struggling with debt, an IVA might sound appealing, but what do you need to know?

Let’s have a look…

Do I qualify?

Firstly, you need to know if you meet the criteria for an IVA and whether or not you qualify for one. Not everyone qualifies for an IVA, and it is dependent on an individual’s circumstances, but having a debt of over £6,000 from two or more lenders is typically the minimum requirement.

The amount you pay each month for your IVA is determined by a close look at your income and expenditure, with a calculation made on your monthly surplus income.

Basically, any money you have left over after essentials each month should be the repayment amount of your IVA. You’ll no longer pay your creditors directly, but an Insolvency Practitioner, who manages the payments and helps you get back on the road to a debt free life. In case of a change of circumstances, such as redundancy or extra expenditure, the IVA will be reviewed to ensure the appropriate repayments are being made.  Your income and expenditure will be reviewed at least once a year to ensure it is still affordable to you.

Can I set an IVA up myself? How do I get one?

Sort of…in order to propose an IVA to your creditors, you need to do so through the instruction of a licensed Insolvency Practitioner. As long as you meet the criteria and seek the correct advice, there’s every chance you’ll be accepted for an IVA.

Do IVAs check your bank account?

It wouldn’t work without complete honesty on your part, which is why IVAs do look at payslips and bank statements, to ensure that the assessments and calculations are conducted as fairly as possible. This is in everyone’s best interests.

So, IVAs then…they sound pretty good so far, right?

They should do, especially if you’re really struggling to make your current payments, but what (if any) are the downsides?

There are a few downsides with IVAs, as there are with everything when it comes to getting out of debt. These include:

• Possible release of home equity
• Minimum level of debt
• No unsecured borrowing during the arrangement
• The need to stick to a strict budget for 5 years
• Damage to your credit rating
• Longer than bankruptcy
• More costly than bankruptcy
• All unsecure creditors must be included

All of these things considered though, an IVA could be the first step to helping someone get out of debt. One lower, affordable monthly payment is the main take home point, but there are so many other benefits beneath this.

For a start, you’ll freeze interest and associated charges.

You’ll also be able to stop any unwanted calls from lenders and any potential harassment that comes with being in debt.

It’s all about being honest with yourself and working out whether this is the right step for you. It could mean not having to rely on family and friends to help you out each month.

It could stop you running out of money in between pay days.

An IVA isn’t a miracle cure to being in debt.

Sadly, there isn’t one, but it could offer a little breathing space for someone in debt.

More importantly, it could provide a route forward.

The post Things to know about an IVA appeared first on The Debt Advice Service.