Other Debt Solutions

Do you qualify for an IVA?

An Individual Voluntary Arrangement, also known as an IVA, is a debt solution where you agree to repay what you can afford to your debt each month, usually for 5 years. The IVA is only available to people living in England, Wales and Northern Ireland. The Scottish equivalent (although there are differences) is a Protected Trust Deed. An IVA can enable a representative to put a proposal to your creditors on your behalf, which if accepted, will mean your creditors can’t take further action against you, you’re able to protect and retain assets, such as a house or car, and you’ll be debt free, once the solution is complete.

An IVA is a contract between yourself and your creditors which helps you repay what you can afford and write off debts (along with interest and charges) that are unaffordable. You make one monthly payment to all of your debts once the agreement is approved and no longer need to speak directly with your creditors.

Once you complete your IVA the remaining debt is cleared and you are debt free.

To determine if an IVA is suitable you should first seek debt advice. You can receive assistance from our friendly charity advisers at Debt Support Trust by telephoning today on 0800 085 0226.

Entering an IVA

An IVA is a regulated solution requiring an Insolvency Practitioner to administer the arrangement. There are positives and negatives to the solution and we’ll make sure you aware of what these are and how they may impact on your personal circumstance. One negative that’s important to consider is that the IVA would affect your credit rating and would last for 6 years on your credit file.

If you qualify for an IVA it’s unlikely you’ll repay all of your debt, however if you come into a windfall, inherit money or earn more money during the term of the solution, then it’s expected you would pay this towards your debts.

Most people entering an IVA would not repay all of their debt and would experience an element of debt write-off. An IVA can be an alternative solution to bankruptcy, however if you’re thinking about entering an IVA it’s important you receive qualified debt advice first.

You may qualify for more than one debt solution and it’s important you have all the facts to make an informed decision. At Debt Support Trust we can help you understand what options are available to resolve your debt problems and help you enter the right debt solution.
You can try our debt test to see if you qualify for an IVA.

What debts are included in an IVA?

Most unsecured debts are included in an IVA, but if you’re unsure we’re here to help. An unsecured debt means a debt which is not tied / secured against an asset. For instance, a mortgage is secured against a house.

Unsecured debts which can be included in an IVA include:

  • Credit card debts
  • Personal loans
  • Payday loans
  • Catalogue debts
  • Store cards
  • Council tax arrears
  • Most overpayment of benefits
  • Utility debts, like gas / electricity / water bills
  • Debts owed to friends/ family
  • Overdrafts

There are some debts which can’t be included in an IVA, including:

  • Mortgage / mortgage arrears
  • Hire purchase agreements
  • Court fines
  • Child support arrears
  • Student loans
  • Fraudulent debts
  • Secured loans

If you’re unsure if your debts can be included in an IVA it’s best to speak to a trained debt adviser who can assist you with tailored advice for your circumstances.

Benefits of an IVA

You could benefit from entering an IVA and some of the reasons people choose to enter an Individual Voluntary Arrangement, are:

  1. Your IVA would be legally binding which means no further charges or interest could be added and your creditors could not take any further action once they have agreed to your proposal.
  2. You will only be asked to make one affordable payment each month and won’t have to pay multiple creditors directly.
  3. As long as you complete the IVA you can expect to be debt free at the end of the solution, with no unexpected bills to pay.
  4. You are likely to be able to keep your home within an IVA, usually the Insolvency Practitioner will only be interested in any equity.
  5. You are allowed an expenditure in an IVA for things you may not have being able to afford previously, such as clothes, sports, hobbies and entertainment.
  6. In an IVA, there are items which are not considered assets and you retain. These include computers, phones, clothes, furniture, televisions, sofas and other household items.
  7. If you have not started to access your pension then you will not be expected to contribute this fund towards your IVA. 
  8. You will regain control of your finances and be able to plan for a debt free future. 

Negatives of an IVA

There are some negatives to entering an IVA debt solution which you should be aware of. Some of the negatives to consider are:

  1. Any available equity in your house or other assets would be considered. You would never be expected to sell your home. If you can’t re-mortgage to release equity then your IVA would be extended for 12 months in lieu of your equity.
  2. An IVA is legally binding so defaulting on the agreement would result in your IVA failing, which could mean your creditors may proceed with bankruptcy.
  3. Your income and expenditure will be reviewed on an annual basis which can mean your monthly contribution could fluctuate up as well as down.
  4. Your IVA would be noted within your credit file. The default on your credit file will last for 6 years in total from the date it was applied.
  5. A remortgage is likely to be on less favourable terms and if you are unable to gain a remortgage your IVA may be extended for up to 12 months.
  6. Whilst your IVA will be listed on the Register of Insolvencies, most people don’t read this and won’t know you’ve entered a debt solution.
  7. If you have assets like shares, savings, endowments, ISAs, bond or stocks then these may need to be realised for the benefit of creditors in the IVA.

Your bank could decide to take money from your account if they are one of your creditors. For this reason, if you’re entering an IVA (or any debt solution) it’s best to open a new bank account, with a bank you don’t owe money to. You should not open an account with a credit facility. More advice on opening a bank account is available from our debt advisers.

Criteria to enter an IVA

There’s criteria you need to meet in order to qualify for an IVA. While you may meet the criteria below, you may still be suitable for other debt solutions and may wish to consider these too.

The criteria to enter an Individual Voluntary Arrangement is:

  • Your unsecured debt should be £5,000 or over.
  • You must have a monthly disposable income which you can afford to pay towards your debts. If your disposable income would mean you can repay an IVA in less than 5 years then it may not be your best option.
  • You must live in England, Wales or Northern Ireland
  • For an IVA to be accepted at least 75% of your creditors must approve the proposal. If 75% of creditors approve your proposal then you will be protected from further action. If less than 75% approve your proposal then we would consider other debt solutions. By speaking to Debt Support Trust first we can help gauge whether a creditor is likely to accept or reject your proposal, based on their voting guidelines.
In An IVA...

Once you’ve entered an IVA there are a number of things you must do to remain compliant with the terms of the agreement. The two main requests are that you pay your monthly contribution towards your debt on time and that you submit paperwork to demonstrate you’re paying an affordable amount each month, when required. Usually you will be asked to complete an annual review and be requested to submit paperwork.

You should also maintain contact with the insolvency practitioner to ensure they are apprised of your current circumstances. If your income increases dramatically, for instance, then it could mean you need to pay more towards your IVA on a monthly basis.

You cannot change your insolvency practitioner when you are in the IVA. Also, it’s important to state that if you decide to stop paying your IVA then you could be discharged and the debts would return to you. You can cancel your IVA but it’s important you seek debt advice first.

How an IVA can help?

Rob, 42 years old, Hull

When Rob contacted Debt Support Trust, he really didn’t know what to do. Like so many people he had chosen to ignore all his debt. Now one of his creditors was threatening to take him to court. Rob owned a property and he was aware that if the case went to court then he could be forced to sell the property.

Rob’s debt level was approximately £50,000 and his equity in his property was £25,000. He did not want to lose the family home so we discussed with Rob the IVA debt solution to protect him from his creditors and allow him to make one affordable monthly payment. We explained all the pros and cons and explained the equity in his home would be assessed near the end of the IVA. We explained that, if possible, 85% of his equity could be released by means of remortgaging. However,  if he was unable to release the equity then his IVA would extend for a further year in lieu of his equity. This meant that instead of being 60 months, Rob’s IVA would be 72 months.

Rob was delighted with this as it meant he and his family could stay in the family home. He would make one monthly payment to his creditors and because it was a formal arrangement the creditors could take no further action against him. By contacting Debt Support Trust before his creditors took action against him we were able to help Rob with a formal solution which would protect him.

Sarah, 29 years old, London

Sarah had come out of a messy break up with her partner and prior to the separation she had debts, but they were under control. Following the split with her ex-partner, her debts began to spiral out of control.

Sarah’s main concern was a loan that she had been guarantor for to help her ex-partner. Sarah’s ex-partner had since declared himself bankrupt and they were requesting her to make the full payment. Whilst the guarantor debt was not the largest of all the debts, it did worry her the most because they called regularly. Like many people who have joint loans she did not realise she was liable for the full amount. Many people are mistaken in thinking they are liable for only half. We looked at all the options for Sarah after assessing her income, expenditure, liabilities and assets. The positives and negatives of all options were discussed and due to the level of debt, protection from creditors and disposable income, Sarah decided that an IVA would be the best way forward for her. 

Sarah is paying £135 towards her IVA each month and the solution will last for 60 months. The original debt was £19,000.

Mark, 51 years old, Liverpool

Mark worked in the financial industry when he approached Debt Support Trust for advice, so it was very important that we asked him to check his contract of employment before he entered any debt solution. While most contracts of employment won’t state you can’t enter a debt solution, some will, especially if you manage money or work in the financial services sector.

In this case Mark spoke with his HR department and they advised him that if he entered an IVA his employment would be safe.

Mark’s debt was just over £46,000 and he had been balance transferring his debts to keep payments affordable, however he was rejected for his latest balance transfer and couldn’t transfer again. This made his monthly payments unaffordable.

A friendly debt adviser completed a statement of affairs and assessed that Mark could afford to pay £270 towards a debt solution. After explaining about the various different solutions, Mark chose to enter the IVA and was able to keep his house and car.

Debbie, 23 years old, Manchester

When Debbie called the charity on a Friday evening she was distraught and felt isolated because of her debt situation. Debbie had £11,000 of unsecured debts to 3 credit cards and a number of smaller catalogue debts.

We began by listening to Debbie and understanding her circumstances. She was living alone, paying £450 per month in rent and couldn’t tell her parents about the debt. 

A friendly adviser explained she was not alone and should not feel ashamed. Getting help with debt is a difficult thing to do, but support is available. Debbie had been unemployed for a period of time and turned to credit cards to help pay the bills, however, she also said that she had overspent when she was younger, so did have some existing debts before she was made redundant.

After gathering some information from Debbie we explained all the debt solutions she could be applicable for. Debbie carefully considered all of her options and decided she would apply for an IVA. Debbie was able to pay £120 per month towards a debt solution and decided an IVA for 60 months was the best option for her.  In our last contact Debbie explained how she had felt the weight had been lifted off her shoulders, she was sleeping again and even told her parents about the debt.

We Have The Answers
What Does IVA Stand For?

The full name of an IVA is an Individual Voluntary Arrangement.

What Is An IVA?

An IVA is a formal debt solution where you agree to make an affordable monthly contribution to your debts usually for 5 years along with any equity from your assets. In return, any remaining unsecured debt obtained before the IVA was accepted by your creditors will be cleared.

Will My House Be Taken Away From Me?

The aim of an IVA is to help you retain your property. The Insolvency Practitioner will only be interested in any equity. We will be able to fully explain what will happen with your property.

A qualified Debt Support Trust advisor can discuss your assets with you. Contact us today for debt help.

Do My Creditors Have To Accept My Proposal?

No, your creditors get to decide whether to accept, reject or modify your proposal. The better the offer you put to them the more likely they are to accept.

After your proposal is sent to the creditors a meeting is then held (which you do not have to attend). The creditors can accept, reject or modify your proposal. If 75% of your creditors who vote at the meeting approve your proposal then it will be automatically accepted. Each creditor gets one vote for every pound they are owed.

Do I Have To Accept A Modified Proposal?

Your creditors have the right to reject or modify your proposal. However, it’s unlikely an insolvency practitioner will put a proposal to your creditors if they do not think your creditors will accept it. More likely, a creditor may modify the proposal.

Your had the right to decide whether you accept your creditors modifications or decide to enter a different debt solution.

What Are The Fees Associated With An IVA?

An IVA is administered by a licensed Insolvency Practitioner and their team. An Insolvency Practitioner will receive a fee for acting as your nominee and supervisor. These fees are paid separately. The insolvency practitioner will also charge for additional expenses.

If an IVA is the correct debt solution for you and you wish to proceed, we can introduce you to one of our panel reviewed companies. If we help gather your documentation and complete the fact find pack to send to the insolvency practitioner we would be acting as their agent, completing work on the insolvency practitioner’s behalf. The fee we would receive from the insolvency practitioner is 50% of the nominee fee if your case was accepted at the creditors meeting.

The fees charged by the insolvency company are outlined below.

Nominee Fee

The nominee fee is paid to cover work carried out to put your proposal to your creditors. A licensed insolvency practitioner is required to review your IVA proposal prior to presenting it to your creditors. The insolvency practitioner will provide a report to advise whether they believe the IVA will be successful.

The nominee fee will cover this work and drafting your IVA proposal, collating information regarding your creditor claims and giving notice of and holding a meeting of creditors.

The insolvency practitioner will be paid the nominee fee from the first payments you make into your IVA. This means your creditors will not be paid immediately and your account will go into arrears. If your account was in arrears already then you will go further into arrears.

Supervisor’s Fee

The supervisor’s fee will typically last for 5 years and cover the ongoing costs to maintain and support your IVA until it has concluded. This would involve completing annual reviews of your IVA, providing reports to your creditors, distributing payments to your creditors and resolving any issues that arise during your IVA as a result of your financial situation changing.

Each insolvency practitioner will have their own fee structure for an IVA and it is typically decided on a case by case basis depending on the complexity of the IVA.

Once your insolvency practitioner has made the proposal to your creditors, they will have to vote on the agreement, including the fee charged by the insolvency practitioner. 75% of the people voting at the meeting must approve it before it is accepted.

An example of fees charged by a licensed insolvency practitioner is below

  • Nominee fee – £1,250
  • Supervisor fee (over 60 months) – £2,475
  • Expenses – £290
  • VAT – £750
  • Typical monthly payment – £300
  • Total paid by individual – £18,000
  • Amount owing at the beginning of the IVA – £31,000
  • Net paid to creditors – £13,235 (43%)
  • Amount written off at the end of the IVA – £17,765 (57%)

Example based on a typical client – with unsecured debts of around £31,000 who has no equity in any property and completes a 5 year IVA.

My House Has Been Repossessed, What Happens?

If your property has been repossessed then the mortgage owner (s) would be liable for any shortfall between the mortgage value and the sale cost (including any fees).

So, for example, if your house is sold for £100,000 but your mortgage is £120,000 then you would have an unsecured shortfall of £20,000 + fees. You would be liable to pay this money.

Important

A mortgage company can legally chase you for any shortfall within your house for 12 years after the house has been sold in England, Wales and Northern Ireland. In Scotland the time limit is 5 years.

In an IVA or Bankruptcy your shortfall from your house sale can be included. If your IVA is accepted and you complete it satisfactorily, then your mortgage company cannot ask you to make any further payments for a shortfall from the sale of your house.

Can I Have An IVA If I'm Self-Employed?

If you’re self-employed then you can apply for an IVA too. The process is very similar however depending on your business, there may be additional requirements and documentation needed.

If you need a line of credit for your business then this can be permitted, with the approval of creditors.  If your income is based on seasonal trade then your IVA can be structured to ensure it’s affordable to meet your repayments on a monthly basis. Tax returns and a cash flow projection will be required in this circumstance.

Lump Sum IVA / Full And Final IVA?

Depending on your circumstances it may be possible to enter a full and final / lump sum IVA.  This is where you offer a one-off payment to your creditors to settle your outstanding debts. This may be applicable if you have no money to pay towards a debt solution each month but could raise a one-off payment for your creditors. For instance, you may be unable to pay towards an IVA on a monthly basis and have £30,000 of unsecured debt. If a family member or friend could give you a lump sum of money to pay towards your debt then you could enter a full and final IVA.

There are other ways to raise funds for a lump sum IVA, for instance, you may be about to sell an asset or receive redundancy pay which could mean you’re suitable for a full and final IVA.

Who Can Enter An IVA?

An individual struggling to repay their debt of above £5,000 and residing in England, Wales or Northern Ireland.

Can I Arrange An IVA For Myself?

An IVA is a legally binding debt solution, which requires a qualified insolvency practitioner in order to enter it. During the period you are in the IVA, the IP will monitor and supervise the debt solution. 

The insolvency practitioner will put your proposal to your creditors and act on your behalf.

Is An IVA Better Than Bankruptcy?

Which debt solution is best will be dependent on your financial circumstances.

While IVA’S and bankruptcy are both insolvency debt solutions, they are very different from each other. 

The impact of each debt solution will affect people in different ways.

It’s important to seek professional debt advice to ensure you are entering the correct solution.

Can I Do An IVA If I've Entered One Before?

Your insolvency practitioner will want you to demonstrate that your new proposal is credible, genuine and sustainable.

Whether you have successfully completed or  failed an IVA, you can still put a new proposal to your creditors.

You can enter an IVA for a second time if your circumstances have changed significantly.

Will My Employer Know?

No, your employer will not be informed you have entered into an IVA unless they are a creditor. 

If I Am Unable To Make A Payment What Will Happen?

It is important that you keep up with your payments to the IVA. However if you are struggling to keep up with paying the IVA there are a number of options available, such as a temporary break or reduced payments. These options will extended the amount of time you are in the individual voluntary arrangement.

Will Be IVA Last Longer Than Agreed?

If you take a payment break from your IVA then this will be added to the end of the debt solution increasing the length of time you are in it.

How Much Will An IVA Cost?

The amount a person pays in an IVA is dependent on their financial circumstances.

An income and expenditure will be completed to assess each person’s affordability and how much disposable income they have available at the end of each month, ensuring all priority bills are accounted for.

The amount of disposable income they have left each month will be the amount they pay towards the IVA.

Will I Still Be Able To Have A Bank Account?

Yes, however if you do owe money to the bank that you have an account with you will be advised to move to a new bank. This is to avoid the bank taking money from your current account to repay debts owed.

Will I Still Get Credit In An IVA?

You are not allowed to obtain any new credit until your IVA is complete. There are some exceptions to this and it’s best to check with your insolvency practitioner. 

Will An IVA Affect My Job?

Only in rare cases will an IVA have an impact on a person’s employment. The easiest way to find out whether your job will be affected by an IVA is by checking your employment contact. 

Would I Be Able To Cancel My IVA?

It would not be advised as it could result in serious consequences. 

You should speak to your insolvency practitioner in great detail about why you wish to cancel the IVA. 

If your IVA is cancelled you would become responsible for repaying your debts, speaking to the creditors and will incur fees from the insolvency practitioner.

What Happens If My Income Increases?

Your income and expenditure will be reviewed on an annual basis by the insolvency company managing your IVA. 

Depending on the outcome of the review your payments may increase or decrease.

Should your income significantly increase then your payments will also increase.

What Happens If I Get A Large Sum Of Money?

If you come into a windfall like a lottery win, inheritance or work bonus you will have to inform your insolvency practitioner. This money would be paid into the IVA for the benefit of the creditors.

What Happens At The End Of An IVA?

You will receive a completion certificate and any remaining debt will be written off. Your credit rating will begin to repair itself, however any defaults will last for 6 years.

I Want An IVA Does My Partner Need To Know?

It is possible if your financial arrangements are completely separate. However, the creditors will need proof of household income and household expenditure. They will also need to know about any joint assets.

Do I Need To Involve All My Debt?

You must disclose all your creditors so they are treated equally. However, some creditors are not involved in the IVA and you must continue to pay them eg. Mortgage payments, fines, child support or HP payments. These are included in your expenditure.

Am I Still Able To Save When I Am In The IVA?

You are able to save anything you accrue from your expenditure part of the proposal. However you must disclose all savings before entering the IVA.

I Live With My Parents Would They Need To Know?Title

If you choose not to tell them then no, however they maybe able to help you if they were aware of the situation. 

I Only Want To Pay A Small Amount Each Month?

This will depend on your income and expenditure but yes it is possible if you have a low disposable income. However the IP’s fees and the contribution to the creditors comes out your monthly payment, so there needs to be sufficient money to cover this.

I Have A CCJS Can They Be Included?

Yes it can be included, unless it has been secured against your property. If the CCJ is being paid through a wages arrestment it can take up to 3 months for the courts to cancel. At this stage it will become involved.

Do I Have To Pay For My IVA?

Most Insolvency Practitioners take no upfront fees, their money will come from your monthly contributions. This is to ensure the payment is gradual over the term of your IVA. All fees and outlays have to be approved at the meeting of the creditor where debtors will be made aware of all the costs. 

What If I Want To Buy a House While I Am In The IVA?

You would have to discuss this with your supervisor because obtaining credit is not permitted. However, if they believed it was in the creditors best interests it maybe possible. However, obtaining a mortgage would be difficult in the current market. You would need a deposit due to the fact most lenders are reluctant to give out 100% LTV mortgages. The lender may also charge a higher premium if they believe you are a credit risk.

Will The Way I Get My Wages Change In An IVA?

Your wages will be paid in the same way, you will have full control over your wages and all of your payments. You will need to disclose what you earn to your insolvency practitioner. Reviews of your income are usually done on a monthly basis.