Entering Into An IVA - Will I Lose My Job?

If you’re struggling with unaffordable debt, the fear of losing your job can play on your mind every day. Falling salaries, cuts in hours, reduced overtime opportunities and cancelled bonuses and pay rises can make you feel like your salary is being attacked from all side. Could an IVA be the last straw and risk you losing your job?

 

Thankfully, there are very few occasions where an IVA could ever truly be an issue with employment, and even then more often than not the fear is unwarranted. Having unmanageable debt outside of an IVA can be more problematic, not least because of the harassment you may get from your creditors. You may not realise it, but your creditors are capable of obtaining an attachment of earnings through the courts to force your employer to pay them a set amount every week/month straight from your earnings and bypassing your bank account. That’s a frightening thought. Could you manage financially if they did that?

 

You may feel you have no choice but to cope with this if it happened because you are in a position of fiscal responsibility and you have a clause in your employment contract stating bankruptcy or other types of insolvency are prohibited.

 

Individuals in occupations such as accountancy and law are usually required by the organisations that govern their professional memberships to maintain solvency, as are professions that occupy a public service role, such as the Police, Fire or Prison Service. To a certain extent it is also traditionally frowned upon in the Armed Forces and Civil Service.

 

However insolvency doesn’t have the same stigma that it used to have, and you may find that even if you do have one of the occupations above, sound financial advice from an Insolvency Practitioner combined with a conversation with your employers and or professional membership organisation will see an IVA solution approved.

 

But what if you are self-employed?

You might think that an IVA would have no problems here, as IVAs were originally set up for business use many years ago, and generally speaking you would be right. Having access to an IVA can help you get your business back on track, ringfencing the debt so you can trade effectively without the burden of debt becoming an obstacle. The only time an IVA may cause an issue is if you are tendering for any contracts that require enhanced financial and credit checks. Many local councils and governments insist of seeing financial records, especially if a project is a large one or will last some time.

 

What about redundancy?

To undertake an IVA successfully you need to have a salary, whether that’s from employment or self-employment. If you are made redundant, you must tell your IP as soon as possible so they can talk to your creditors. You may be able to take a payment break, extend the term of your IVA or in exceptional circumstances accept the IVA as complete where it is. The key is to tell your IP as soon as you know what’s happening so they can take action.

 

Can it affect job hunting?

An IVA could affect your job hunting if you are looking for something that requires financial vetting. Working in finance is an obvious job that will require that, but less obvious are positions of public service, such as the Police Service, as large unmanageable debt is considered a possible opening for someone to be blackmailed or corrupted.

 

What if you get a pay rise?

Every year your Insolvency Practitioner undertakes a financial review of your case. They will ask for all of your latest bank statements and payslips, and request you go over your budget again and get it up to date. If you have had a payrise, they will look to increase your payment to your creditors although they will take into account any increase in expenses the payrise might incur if it comes as part of a promotion. Cost of living increases will also be taken into account.

 

And finally…overtime and bonuses.

It’s lovely when you can take advantage of opportunities to receive more cash – and that’s just what your creditors think too! If you receive money for overtime or bonuses, your Insolvency Practitioner will look to apportion some of it to your creditors. How much is down to their own discretion, but usually they accept that extra in your pocket now and then can give your morale a much needed boost and help you keep on track to successfully complete your IVA.

EMPLOYMENT FAQs

Will my employer find out about the IVA?
Your Nominee/Supervisor would not contact your employer unless we required specific information from them, normally in circumstances where you have failed to comply with the terms of your IVA.  The only other way they can find out is from the Individual Insolvency Register. 


Can I be self-employed and still be allowed to sign an IVA?
Yes.  You will be asked to show proof of your income either by providing bank statements, your most recent set of accounts and/or information provided by your accountantYou will then be asked to make an affordable contribution based on your income and expenditure.


Will I be able to continue trading if I am in an IVA?
If you are a sole trader then your Nominee/Supervisor will assess your business and confirm if you can continue to trade.  It is likely that if continuing to trade will provide you with an income to allow you to make a contribution payment then you will be able to continue trading.  Please contact us for further advice.


Would I need to pay tax if I am in an IVA?
Yes, you must keep up to date with your tax returns and pay all taxes due from the date of your IVA being approved.


What about my tools of trade?
If you require tools to continue with your work, then you will be allowed to keep them.


Will I be able to trade from leased premises if I sign an IVA?
You will need to review the terms of your lease and with your Nominee/Supervisor’s help you may have to enter into negotiations with your landlord to retain the premises.  Please contact us for further advice.


Will signing an IVA affect my job?                                                         
It is possible that by entering into an IVA it could affect your existing employment and prospects for future employment.  If you are in any doubt then you should review your employment contract and/or speak confidentially to your HR department.  If you are working in the financial services industry, police, armed forces, prison service, licensed HGV driver, Chartered Accountant or are a member of any recognised professional body then you should take further advice, this will be discussed by your adviser prior to you applying for an IVA.

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Write Off Unaffordable Debts

In most circumstances an IVA will allow you to write off most of what you cannot afford to repay, i.e. such as unsecured loans and credit card debts will be gone for good once you have received your discharge notice. Note: There are some debts that cannot be written off. Click here* for more information on the limitations.
 

Free From Debt Pressures

Unlike a Trust Deed Scotland, an IVA can make you totally free from provable debts within 60 months, although you will have to make a contribution from your income for up to 3 years if you can afford to. Once you have received your discharge then you are totally debt free subject to some limitations depending on your circumstances.
 

Government Solution

An IVA is under the control of the Government and is intended to help people who are struggling wither finances. An IVA is a formal, legislated debt solution and a legally binding agreement with your creditors meaning you can take piece of mind that every aspect of your agreement is covered contractually and legally.

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