What is an IVA?
What is an IVA?
An IVA is a government-backed method of restructuring your existing debts so you pay back what you can afford over 60 months. Every month you make one affordable payment to an Insolvency Practitioner, who in turns distributes the payment to your creditors. At the end of the term, any remaining debt balances are written off and you will be debt free.
Will an IVA write off all of my debts?
No, only the debt balances that have been agreed with creditors forecast to remain at the end of the IVA. IVAs are designed to make sure creditors get some of what they are owed so you cannot write off debts completely. Only bankruptcy can do that.
Can I still keep my car?
Generally you can still run a car under an IVA, however if you own an expensive car outright your Insolvency Practitioner may ask you to downsize to a less expensive model. If you need a vehicle such as a trade van for business purposes it is likely you will not be asked to downsize it.
Will I have to sell my home?
You will not have to sell your home to find something cheaper, or move out into rented accommodation. You may be asked to release some equity from your home if there is any, and permission to go ahead with the IVA may be required from anyone you jointly own the property with.
Can I have an IVA if Iím renting?
Yes, property ownership is not required for an IVA. Even if you still live at home, you can still have an IVA, and your Insolvency Practitioner will take into account any payments you make to your parents as part of your keep.
Do I have to tell my boss about the IVA?
Unless you have a job where bankruptcy is forbidden as part of your employment contract, for example being in a position of fiscal responsibility, your boss does not need to know you have entered into an IVA.
Can I have an IVA if Iím on benefits?
No, you must either be employed or unemployed with a regular salary to take on an IVA. Even if it wasnít against the law to fund an IVA with state benefits, they are usually set at a basic level of subsistence, and there will not be enough money to cover all of your living expenses and a payment to creditors.
What happens if I canít keep up my payments?
If something has happened and you know you wonít be able to keep up your payments you must contact your Insolvency Practitioner as soon as possible. They may be able to arrange a payment break for a few months until you are back on your feet, or renegotiate the terms of the IVA.
What will happen to my credit rating?
Your credit rating will unfortunately take a hard knock, if it hasnít already. Financial troubles usually record a pattern of late payments or defaults prior to an IVA. In this case, your credit rating will be affected for the duration of the IVA and a year or two after this too.
Can I keep my credit cards?
You will not be allowed to have credit cards while you are undertaking an IVA, and although you may have some cards already, your Insolvency Practitioner will render them inactive once the IVA goes ahead.
What does the IP do in an IVA?
The IP will act, firstly as your Nominee and then when your proposal has been approved by creditors, the IP will act as your Supervisor. As a nominee, the IP will verify that your proposal to creditors is affordable and manageable and as a Supervisor the IP will ensure the arrangement is carried out in accordance with the terms of the proposal.
Is an IVA different from a Trust Deed?
An IVA is the English equivalent to a Scottish Trust Deed. An IVA is mainly for residents of England, Wales and Northern Ireland and a Trust Deed is mainly for Scottish residents.
Do I qualify for an IVA?
To enter into an IVA with Simple Financial Solutions Ltd you must meet our following criteria: - You currently live in or have lived in England/Wales/Northern Ireland within the last 12 months, or have a place of business in one of those countries. - You have debts of £10,000 or more - You are able to pay a monthly contribution from your income and/or have realisable assets that will enable a return to creditors of at least 10p in the £. - You are insolvent (you are unable to pay your debts as they fall due and/or your liabilities are greater than your assets)
Do I have to pay a fee to set up the IVA?
Our initial advice is free and there is no cost to you if you decide against proceeding with an IVA. Should you choose to apply for an IVA then there will be a charge for our services. This charge is met by your Insolvency Practitioner (acting as your Nominee), who will recover the cost from the realisations made from your assets and/or contributions. Your adviser and your Nominee will explain the costs of an IVA and further information can be found by clicking here.
Do I need to make payments to my unsecured creditors if I am in an IVA?
No. After your IVA is approved by creditors, all payments to your unsecured creditors will stop. There are a few exceptions to this rule, for example, student loans and court fines.
How do you calculate surplus income?
We will calculate your surplus income by taking into account your income and deducting all of your day to day living expenses & household bills (not including any money owed to your unsecured creditors). After allowing for these expenses, whatever money you have remaining should be paid towards your IVA.
How are the Nominee/Supervisor fees paid in an IVA?
All fees and costs are met from the funds received into the IVA, there are no payments due by you over and above the agreed contribution from your income and/or assets. For further information on our fees please click here.
How do I set up an IVA?
1) Contact us by telephone, email or complete the ĎContact usí form and an adviser will call you back at a time requested by you. 2) Our adviser will assess your financial position and advise you of the options available to you. 3) If you are suitable for an IVA and choose to go ahead with it, you will be asked to sign the relevant documents after being given time to fully consider your decision.
What is the Individual Insolvency Register?
The Individual Insolvency Register is a public record accessed via the Insolvency Serviceís website. This register is where all IVAs, DROs and bankruptcies are recorded.
What happens after I have been accepted for an IVA?
We will pass your details to an Insolvency Practitioner who will act for you as your Nominee and Supervisor, as described above. Your creditors will be presented with a proposal which contains details of your income and expenditure, Statement of Affairs and other statutory documents. A meeting of creditors will then be called and your creditors will vote to accept or reject your proposal. For the IVA to be approved, 75% in value of voting creditors must agree to the proposal, provided this is achieved then the IVA will proceed as agreed.
What happens if my IVA proposal fails to be accepted by creditors?
Your nominee will, if possible, modify the proposal and submit the revised proposal to your creditors for their consideration, if the IVA is not approved following modifications then you will normally have to consider making an application for bankruptcy.
What should I tell creditors who contact me after the IVA has been signed?
Your creditors will be notified of the IVA and should deal directly with your Nominee/Supervisor, if any of your creditors continue to contact you then you should advise them that you have an IVA and offer your relationship managerís contact details. If the creditor does not accept them then advise your relationship manager and they will contact the creditors on your behalf.
Are my benefits included as part of my income in an IVA?
Yes, benefits can be included as part of your income, it is also possible to complete an IVA proposal whilst in receipt of benefits only, however, this is not desirable and other options may be more appropriate.
Will the payment remain the same for the term of the IVA?
The amount you pay to your IVA will depend on what you can afford, if you have a change in circumstances then you should inform your relationship manager and your contribution will be reviewed accordingly. It is possible for your payment amount to increase or decrease. Regardless, we will write to you annually for an update on your financial position.
Do I need to inform my Supervisor if I have a change in circumstances, e.g Salary increase?
Yes. Your Supervisor will conduct a review of your income and expenditure every 12 months to obtain an update on your financial situation, however, if you have a change at any time you should inform your relationship manager, as soon as possible.
What happens if I am unable to maintain contribution payments due to losing my job?
You will be required to inform your Supervisor of any redundancy and severance payments, within 14 days of receipt. If you were unable to maintain the contribution, the Supervisor would allow you a payment break of up to 6 months. On your return to employment your Supervisor will review your position and consult with creditors, where appropriate, before your payment recommences at an agreed level.
What happens if I am unable to resume payment of my contribution following a payment break?
Your Supervisor will consider if it is appropriate to issue a Certificate of Termination and/or present a petition for your bankruptcy.
What happens if I am unable to work due to ill health?
Similar to when you lose your job, your Supervisor would grant you a payment break of up to 6 months. If and when you returned to work then your Supervisor would review your income and expenditure and your payment would recommence at an affordable level. If you were unable to return to employment in the long term then your Supervisor will consider if it is appropriate to issue a Certificate of Termination and/or present a petition for your bankruptcy.
What happens at the end of my IVA?
When you have fulfilled all obligations in terms of your IVA i.e. paid all contributions/complied with your Supervisor, then you will be discharged from any debt incurred prior to the IVA being approved by creditors. Any remaining unsecured debt (other than those excluded)in your IVA will be written off. Your Supervisor will carry out the required statutory procedures to conclude your IVA and you will then be formally discharged from your IVA.
Will it affect my partner if I enter into an IVA?
If an IVA is setup for you as an individual (not jointly with your partner) then it should not affect your partner unless they are also in an IVA or subject to bankruptcy, they are jointly liable for any debts included in your IVA and/or they jointly own property included in your IVA. It is preferable to advise your partner and allow them to consider the impact an IVA would have on them.
What happens to joint debts in an IVA?
It is a common misconception that if a debt is in joint names then each joint owner is only liable for 50% of the debt Ė that is incorrect. Joint owners of debt are jointly and severally liable, that means each joint owner is liable for the full amount of the debt. For example, if you enter into a IVA and your partner does not, your partner would be liable for the full amount of any joint debts and it is likely that the creditor(s) will pursue them unless they maintain the full contractual repayment. It is very important to consider the impact that signing a IVA has on the joint owner of any debt. However, if the other party is also subject to bankruptcy or an IVA, then the creditor would not be able to pursue them for any balance due.
Are all debts included in a IVA?
No. An IVA can only cover your unsecured debts such as credit cards, storecards, bank overdrafts, mortgage shortfalls, HP shortfalls and personal loans. It does not cover debts secured on any assets, such as mortgages and Hire Purchase agreements for motor vehicles. Court fines are also excluded from the IVA process as are student loans.
Is debt to HMRC included in my IVA?
Yes, any arrears of self-assessment tax, National Insurance payments and VAT accrued prior to the date of your IVA are included. Ongoing HMRC liabilities must be maintained.
Will I be able to use credit once I have completed my IVA?
You are allowed to obtain credit once you have completed your IVA, however, you may find it difficult due to an adverse credit rating. Credit reference agencies usually hold information on your credit file for 6 years, so it may take time to build up your credit score again. It is possible to help improve your credit history by maintaining, for example, mobile phone contract payments and other such payments. It is advisable to seek further information on how to improve your credit rating at the conclusion of your IVA.
Will I be able to use credit whilst I am in a IVA?
Whilst there is no legislation to restrict you from using credit, there will be no allowance given in your income and expenditure for any repayments, therefore, it is not deemed appropriate to incur further debt whilst in a IVA.
What happens to my bank account?
If you do not owe your existing bank any money it is unlikely you would need to change banks. However, if you have an overdraft or other debt with your bank then you will need change banks and arrange for your salary/wages to be paid into a new account. You should also transfer your essential direct debits to the new account, making sure not to transfer direct debits to the unsecured creditors included in the IVA.
Does signing an IVA affect my parentsí credit rating?
The IVA will be listed under your name and the address you reside at, however it is your IVA and should not affect your parent's credit rating. If an issue ever arose, they can have a letter of disassociation placed on their credit report. This is explained in more detail on the credit reporting agencies web sites.
Can I keep my car in an IVA?
Yes, it is unusual for a car to be included in an IVA proposal unless it had a significantly high value and especially if it was required for work purposes. If a car does have a significant value then your payment period could be extended to take account of the carís value and/or a third party could pay the amount in full or by instalments during the IVA period.
If my car is on finance, will I keep paying this in a IVA?
It depends on the agreement. If your car is subject to a fixed sum loan agreement then you would stop making payment to the finance company and the debt owed would be included in your IVA. If it is subject to a Hire Purchase, Conditional Sale or PCP agreement, then it will be secured against the car and you would continue paying this if your creditors agreed to the monthly expense.
Is my pension affected?
In general, no, however you should discuss the existence of your pension and you will be advised accordingly concerning the availability of a tax free lump sum and the contributions you make to the pension.
What will happen to my endowment policy?
If you have an endowment policy that is not assigned to your mortgage lender, then it may have to be surrendered for the benefit of your creditors. Alternatively, a third party could pay the equivalent of the policyís surrender value and/or you could extend your payment period, therefore, allowing you to keep the policy. You will be given an allowance to maintain the monthly premium in your IVA income and expenditure.
What happens if you receive Inheritance whilst in an IVA?
If you inherit monies or assets during your IVA then the windfall you receive will form part of your estate and should be passed to your Supervisor for the benefit of your creditors.