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IVA FAQ - Your IVA Questions Answered

IVA FAQ

IVA FAQAn IVA is a formal debt solution so should be considered carefully before you decide if it is right for you. We can provide you with all the information you need about an IVA.

Read our extensive list of IVA faqs to gain more knowledge about the solution and how it works. If you have any questions that are not answered below, we will be happy to answer them for you.

Click here to chat to an IVA advisor online or fill in the form on this page and we will call you for a chat. All advice we provide is free and confidential.

An IVA; short for Individual Voluntary Arrangement, is a formal insolvency solution that allows you to deal with debts that you cannot afford to repay. In an IVA you agree an affordable repayment plan with your creditors (the people you owe money to), which can be a monthly repayment or a lump sum (if you can gain access to it). You usually pay less than what you owe in an IVA and on completion of the arrangement, any remaining debts are written off.

Insolvency is the term given to a person or company that is unable to repay their debts, on time, as agreed by their creditors. There are different types of Insolvency solution available for dealing with debts.

Any business or individual that is struggling with repaying their debts may be eligible for an IVA, however there are certain criteria (see below) where an IVA is better recommended for both you and your creditors over other Insolvency solutions, such as Bankruptcy.

The criteria where an IVA may be favoured over other Insolvency solutions are as follows:

  • You have debts that you cannot afford to repay
  • You are struggling to manage your monthly debt repayments
  • You owe money to more than two creditors (in some cases just 1 creditor)
  • You have some sort of income left over each month (after living expenses but before any debt repayments)

It is not possible to do an IVA on your own. An IVA is a legal debt solution and you will need the assistance of a professional called an Insolvency Practitioner or IP to apply for one. The IP will also supervise and monitor your IVA for its duration. An Insolvency Practitioner is the person who is qualified and licensed to act on behalf of someone who is Insolvent. Most IP’s are accountants or insolvency specialists. We have a team of 5 IP’s in-house at McCambridge Duffy, which allows us to handle all Insolvency proceedings in house.

There is no clear answer for this. It really depends on your financial situation and your own choice of which you feel is right for you. IVAs and Bankruptcy are two very different Insolvency procedures that can both deal with your debts. They also have some similarities. Knowing which is better for you is dependent on your circumstances. Certain factors of each Insolvency solution will affect you differently. For example:

  • An IVA could protect your home and vehicle, where bankruptcy might make you sell those assets.
  • You might be in a very professional job, where Bankruptcy is not an option.
  • You might have no assets where Bankruptcy is the better option.
  • You might want to make some sort of monthly repayment towards your debts or you might just want to address everything quickly and be free of your debts in the quickest way possible.
  • You might be worried about the Bankruptcy fees.
  • You might not want your insolvency listed in the local newspaper.

There are also certain factors in both solutions that are similar. For example,

  • They are both formal Insolvency solutions
  • Your credit rating will be affected in both an IVA and Bankruptcy.
  • Some types of employment can be affected by both solutions.
  • Both solutions are listed on the Insolvency register.

Debts that can be included in an IVA are:

  • Loans
  • Overdrafts
  • Credit cards
  • Store cards
  • Charge cards
  • Catalogue debt
  • Payday loans
  • Council tax arrears
  • Tax debts
  • Some Utility debts
  • Shortfall debts

Debts that cannot be included in an IVA are:

  • Court fines
  • CSA Arrears
  • Debts from fraudulent activity
  • Secured loans
  • Mortgages
  • Rent Arrears (unless your landlord agrees to it)
  • Student loans
  • Hire Purchase agreements

A standard IVA usually lasts for 5 years (60 monthly payments), although it can be completed in as little as 12 months if you can propose a lump sum payment to settle your debts.

If you are a homeowner with equity, this will be reviewed in the final year of your IVA. You may be required to introduce some of your share of the equity into the agreement. If this is not possible then your IVA could be extended for up to another year. This will all be explained in detail prior to applying for an IVA.

Pros of an IVA

  • 1 affordable monthly payment
  • Remaining debts are written off on completion
  • You are legally protected from your creditors
  • Interest and Charges are completely frozen
  • You will usually be debt free in 5 years or as little as 1 year if you can offer a lump sum payment to settle your debts.
  • Suitable for anyone – tenants or homeowners, single or couples, business owners etc...
  • Your credit rating is affected but will start to repair on completion.
  • We can have an IVA set up in as little as 4 weeks.
  • We do not charge any upfront fees, saving you time and money.

Cons of an IVA

  • If you are a homeowner with equity in your property, you may be required to produce part of your share in the final year of the arrangement. If you are unable to do this, your IVA could be extended for up to 1 more year.
  • If you have a change in circumstances and cannot pay your IVA payments, your IVA could fail. Your IP should try and work with you and your creditor to amend the terms of the IVA, but creditors may not accept the amended terms.
  • If your IVA fails you will be liable for the full amount of the remaining debts, minus what you have paid under the IVA.
  • If your IVA fails your creditors may take bankruptcy proceedings against you.
  • Your credit rating is affected in an IVA for up to 6 years.

No two IVAs are the same. Your monthly IVA payment is completely unique to your circumstances. It is calculated by analysing your living situation, income, expenses, your priority debts and your unsecured debts. The money left over each month after all expenses and priority debts (but not including other debt repayments) are paid will be your IVA payment.

The fees payable in an IVA come from your monthly payment. Fees are agreed with your creditors who set our fees at the beginning of the arrangement. You will never receive a bill from us. So essentially, the fees and costs for an IVA all come from the one monthly payment that you make each month.

We do not charge upfront fees for drafting and submitting your IVA Proposal. We only put an IVA case forward if we believe it will be a successful one for both you and your creditors. In the event that your IVA proposal is unsuccessful, then you will not be charged a penny.

If you cannot pay your debts as they fall due, you are insolvent; by law your alternatives are debt management, bankruptcy, a Debt Relief Order, an Individual Voluntary Arrangement or some other debt solution.

An IVA will be a viable option if

  • You have enough disposable income each month to service an IVA.
  • You believe a Debt Management Plan will have an excessive duration.
  • You are unable to obtain a loan.
  • You cannot raise enough money to address your debts in full.
  • You have assets that you wish to safeguard under an IVA.
  • You wish to avoid any adverse effect that Bankruptcy would have.
  • You are a company director and wish to avoid Bankruptcy as it will cause you to lose your directorship.
  • You wish to avoid the publicity and perceived stigma associated with bankruptcy.
  • You require formal protection from your creditors.

Deciding if an IVA is the right choice for you is not something that should be entered into lightly or hastily. It is important that you find out and digest as much information as possible to determine if it is your best option. You also need to make sure you have discussed all possible alternative options with your debt advisor or IP. Essentially, we can only advise and provide all the information. It is you that has the final decision on whether or not you want to proceed with the application.

We cannot speak for all Insolvency firms that are handling your IVA, but here at McCambridge Duffy we have a very high IVA acceptance rate. Because we do not charge any upfront fees, we only put forward an IVA application if we believe it will be a successful one for both you and your creditors. If your IVA proposal is unsuccessful, then you will not be charged a penny from us. Be wary of firms that are charging upfront fees for putting through your IVA application. If your IVA is not accepted, you will be out of pocket for the money that you have paid up front.

Most creditors are fully aware of an IVA and what it is, as it's been in existence for over twenty years. If 75% of your creditors by debt value vote in favour of your IVA, then all creditors are bound by its terms. Creditors can suggest alterations to your proposal and you can choose whether to accept them or not. If your creditors vote against your proposal you still have the option of an informal arrangement or other solutions.

Generally speaking, creditors favour IVA’s over some other Insolvency solutions as it shows you have a willingness to try and pay back what you can and gives them a return on their money outstanding.

An IVA must be approved by more than 75% (by debt value) of your creditors at a meeting of creditors. On some occasions creditors may reject a proposed IVA. The most common cause is that they are not happy with the proposed arrangement and it is not at a level that meets individual creditor guidelines.

If your IVA is rejected at Meeting of Creditors, it may be possible for your IP to make amendments and re-propose the IVA if you are in a position to offer a revised IVA payment. If this is not the case, you will have other options available to deal with your finances. We can discuss this with you further. Call 0800 043 3328 for more information or click here to read more about rejected IVAs.

It is only natural to wonder how a formal Insolvency Solution such as an IVA will affect your partner or spouse. If the debts are your own then your partner, their income and their assets will not be affected. If you are co-habiting you may need to disclose your partners income, but this is simply to analyse how the household income and expenses work and to make sure the bills are being paid fairly and evenly between you both.

Your partner will be affected if you both have joint debts. You are both responsible for the full amount of the debt. An interlocking or joint IVA would be recommended in this instance, if possible, because if you go into a single IVA, then your partner is still responsible for paying the joint debt regardless.

Yes. Your credit rating is affected in an IVA. It will be noted on your credit file that you are in an IVA and your credit rating will be affected for up to 6 years. However, bear in mind that if you are struggling to repay your debts before seeking help and you have missed payments, then chances are your credit rating is already affected and will continue to deteriorate. The consequences of not addressing your debt problem could be just as harmful to your credit rating. Any debt solution you enter into will affect your credit rating because you are no longer paying your agreed contractual repayments with your creditor.

After the 6 year time period of your credit rating being affected, you credit rating will start to repair.

When you are in an IVA all of your current credit agreements will be stopped. You are not permitted to obtain any new credit until after your IVA is complete.

You can have a bank account in an IVA. In some cases, you may be required to change bank accounts, while your IVA is being prepared. This is because if the bank involved is also a creditor involved in your IVA, they may attempt to remove money from your account for any debt outstanding. A new bank account with a creditor that you have no debts outstanding with, will prevent any issues like this. We can let you know if any of your creditors are linked to your current bank account.

Before you begin an IVA your IP will discuss everything you need to know about what can happen to your home or mortgage when in the arrangement.

In an IVA your home is protected. You do not have to sell your home. However, if you do have equity in your home after taking account of the mortgage on it, you will likely have to release part of your share of the equity by means of a remortgage, in the final year of the arrangement. If you are unable to remortgage or it is not affordable to remortgage at this stage, you may have to continue making IVA payments instead, for up to another year.

If you are looking for a home while in an IVA, it is not likely that you will be able to obtain a mortgage.

As a general rule, your assets are protected in an IVA. You should make your IP aware of any assets that you have such as property, vehicles or other items of significant value. If you own a car you are usually able to keep it, depending on it’s value. If your car is deemed as excessive in value, your creditors might consider this as a problem and ask you to sell it. If you have to sell your car, you will be allowed to buy a replacement of a lower value. If you own multiple cars, this is something that might also be queried.

If you do not own a car, but have a car out on Hire Purchase it is likely that you will be able to continue paying for this. Some HP companies won’t allow this, so you will need to check that this is allowed with your HP Company. When the HP payments finish, you may be required to contribute the extra money towards your IVA.

State Pension

If you enter an IVA your state pension is not affected.

Personal Pension

Any money already paid into your pension is safe. But any current/ future pension payments could be affected in an IVA. Creditors might require you to cease pension payments for the duration of your IVA and contribute the payments instead towards your monthly IVA payment. If creditors do not require you to cease pension payments, then they might ask for reduced pension payments instead.

If you are to receive a pension lump sum during the term of your IVA, this could be classed as a windfall and you may be required to pay this into your IVA. Your IP can advise further about this.

No, but you do need a source of income or benefits that is more than you need for living expenses.

Generally your job will not be affected in an IVA, but there are some professions where doing an IVA will mean you can no longer practise in that profession, or you will be able to practise but with certain restrictions. i.e. if you are in a role related to finance, law, property or accountancy. If you are worried about how an IVA might affect your job, you could check the conditions of your contract to make sure.

McCambridge Duffy offers a complete guarantee of confidentiality and privacy in relation to your financial affairs. We will never disclose any information about you to any outside organisation and will never say who we are when we call you. This means that you can feel safe in providing your contact information, without worrying that others will find out that you are seeking our help.

Generally the only people interested in knowing about your IVA are the people involved in it, such as your creditors and your IP and sometimes utility providers or the local council (if one of your debts is Council tax arrears).

Anyone that does an IVA has their details put onto a public register call the Insolvency Register which is located on the Insolvency website. The website can legally be accessed by anyone, but it is highly unlikely that anyone will check it. It is generally only of interest to people dealing with Insolvency related matters or creditors and credit agencies. Unlike Bankruptcy, your name is NOT published in any local newspaper when you enter into an IVA. This is one of the reasons why an IVA is favoured over Bankruptcy. It is more private.

Approved IVAs are published in Stubbs Gazette, a magazing that can be requested by various Insolvency and financial professionals.

The Insolvency Register is a public register available online. It contains searchable information on any Insolvency solution, such as Bankruptcy, IVA’s and Debt Relief Orders. Anyone who is currently in one of these solutions will have their details on this register. When your Insolvency solution is complete your details will be removed from the register (this can take a few months).

It is important that you keep up repayments on your IVA as failure to do so could result in failure of your IVA and may lead to Bankruptcy. In saying that, an IVA lasts for a significant length of time, so it isn’t uncommon for the odd problem to arise throughout its term, causing you to miss a payment.

If you are worried that you are going to miss a payment you need to contact your supervisor immediately. There may be options open to you, such as a payment break if your missed payment is deemed as an emergency, or you might need your IVA payments temporarily altered. Any missed payments will need to be accounted for and will most likely be added at the end of your IVA.

If you have had a significant change in circumstances during your IVA, your IP may need to negotiate amendments to your IVA with your creditors. If your creditors won’t agree to the amended terms then your IVA could fail, which could lead to Bankruptcy.

If there is a valid reason a payment break can be arranged with your supervisor or IP. This will in turn cause your IVA to be extended as the missed payments will likely need to be added on at the end of your IVA.

You can cancel an IVA but it is not advised unless the reasons for doing so are acceptable. Cancelling an IVA can result in serious consequences. It needs a lot of thought and you should discuss it and your reasons why you want to cancel with your IP or supervisor.

If after discussing with your IP you want to cancel, then you need state this to your IP in writing. Your IP will fail the IVA and send you a notice of termination. You will still need to address your outstanding debts and be responsible for IP fees. If you do not sort out your debts with your creditors promptly after termination, you could be made bankrupt.

How your IVA fails is dependent on the terms of the arrangement, how much has been paid into the arrangement and at what point it fails. Some IVAs will require your IP to apply to the court to make you bankrupt if enough contributions have been made to meet the costs associated with this process. Other IVAs will simply fail and a payment will be made to creditors if possible.

Any money already paid into the arrangement will be used to meet the fees and costs associated with its preparation and supervision, to fund a bankruptcy petition (if necessary) and / or will be distributed to creditors.

You will lose the formal protection of an IVA when it fails and creditors can therefore instigate recovery action against you. They can apply interest and charges to your accounts.

In an IVA, your supervisor will carry out yearly reviews of your income and expenses to ensure that your monthly payments reflect your surplus income. Your IVA payments could go up or down a little depending on the review. If your income increases significantly during the term of your IVA, you may have to contribute more to the monthly payments.

If you receive a large sum of money during the term of your IVA, such as a lottery win, a work bonus, or inheritance, this is considered as a windfall. Such a payment will have to be declared to your IP and paid or part paid into the IVA for the benefit of the creditors. This also includes PPI refunds.

On completion of your IVA you will receive your completion certificate. Any remaining debts are written off as agreed and you can start over free of debt. Your creditors will update your credit file. Keep an eye on your credit report in the following months to make sure everything has been updated by your creditors.

Your credit rating will begin to repair 6 years after the commencement of your IVA.

Yes. A CCJ can be included in an IVA. Inform us about this when you chat to us. The IVA can prevent any further action being taken.

Yes we are. We are one of the UK’s leading and longest established IVA providers and have thousands of happy clients. We also have one of the highest success rates in the industry. We have 4 full time highly regulated Insolvency Practitioners with a wealth of experience and knowledge which means we can handle everything efficiently in-house.

Yes, McCambridge Duffy and its members are regulated by ICAS (Institute of Chartered Accountants of Scotland) and DETI (Department of Enterprise, Trade and Investment). We are also members of: R3 (The Association of Business Recovery Professionals) and the IPA (Insolvency Practitioners Association).

Simply complete our online IVA application form. We will then get in touch with you to review your current circumstances and advise whether an IVA is indeed the most appropriate solution to your problems. Once we receive your application form, we will either confirm if an IVA is an appropriate solution or offer alternatives. If you wish to pursue the IVA option, we will proceed with your IVA proposal. We will then submit your proposal to your creditors which explains in detail the circumstances of your current problems and your proposal to repay what you can afford. Once creditors accept it, the proposal is sent to you for review. If you're happy with everything you sign the proposal and we will put your IVA in place. At no time throughout this whole process (which can be as little as 4 weeks) do you pay any monies over to us.

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IVA Example

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In the IVA example pictured above, our client was struggling with payments of £600 per month to their creditors. We were able to reduce the payment to £240 per month. After 60 months of paying this reduced amount, their IVA will be complete. Any remaining debts will be written off and they will be able to start over debt free.

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