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An IVA and its' Implications For Individuals

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Individual Voluntary Arrangement (IVA).

Individual Voluntary Arrangement (IVA) and other debt solutions available.

Once you have taken debt advice (Say citizen advice) and an approach an Insolvency Practitioner to apply for an IVA.

Careful consideration is required. Dial-in any future circumstances change. (Inheritance, Job Promotion, etc.).

Suffering from persistent debt and need IVA advice?

Should I commence an IVA or arrange a debt consolidation loan to deal with your debts?

How will I know if my position qualifies for an IVA, and do I have to pay upfront for debt advice?

Then read on for explanations to the above questions and many more.

An Individual Voluntary Arrangement is a formal agreement (Debt Solution) to pay back your creditors over a maximum of 5 to 6 year period (In England and Wales). Your debt only then is once consolidated into one affordable monthly payment or a payment structure that suits you personally.

You are then debt-free within five years, as any outstanding debt included in this IVA no longer exists.

However, once approved, your creditors stop pursuing you for your debts, and additionally, you will know precisely when you will be debt-free.

Call us today on 0800 612 5448 for more information and advice on how an IVA could work for you.

Insolvency Register 

Applicable to individuals in the UK.

The IIR is a combination of individual insolvency, bankruptcy restrictions and debt relief restrictions registers. The Insolvency Service maintains the

 register for viewing in the public domain.

The register includes:

  • Bankruptcies 
  • Debt relief orders 
  • Individual voluntary arrangements (IVAs) and Fast-Track voluntary arrangements (FTVAs),
  • Existing bankruptcy restrictions orders or undertakings (BROs/BRUs) and interim bankruptcy restrictions orders (iBROs)
  • Existing debt relief restrictions orders or undertakings (DRROs/DRRUs) and interim debt relief restrictions orders (iDRROs).

For further information about the IIR, please read ‘guidance‘.

Contacting an IP myself

The Insolvency Service provides a directory of Licensed Insolvency Practitioners, which include those at HBG Advisory.

Companies charging fees up-front

Please stay clear of companies who are not regulated and offer to put you in touch with an IP once you have paid them a fee.

HBG Advisory does not charge an up-front fee.

We fully disclose our terms and conditions for clarity and openness.

Our policy on our fees remains fully disclosed under IVA charges.

Our IP’s are Licensed Insolvency Practitioners with the Insolvency Practitioners Associated Fully insured and covered by bonds.

Individual Voluntary Arrangement (IVA) – Joint IVAs

  • Couples can set up two IVAs administered as one, once accepted by creditors.
  • Joint debts included in both arrangements.
  • Allows the household to make one affordable payment to all creditors through the IVAs.

Read Options to clear your debts.

Individual Voluntary Arrangement (IVA) – IVA or Bankruptcy?

IVAs are considered by some to afford the best option, an adverse financial situation. An IVA remains legally binding with your creditors, and the outstanding debt may be cleared within 5-6 years. However, fees are higher than in bankruptcy. Assets, though, can be kept, and a payment structure is made that suits your situation. However, an IVA can be stringent and needs to be maintained. Failure then risks bankruptcy. Many professions are affected by forms of insolvency. Ensure you check your contract of employment before considering entering an IVA.  Other options exist which are not public, like  Debt Relief Orders (DRO).

What is an IVA – Individual Voluntary Arrangement?

The formal agreement between you and your unsecured creditors to repay your debts over an agreed time.

Any debts remaining after the period remain written off.

In almost all IVA’s, you would make an affordable monthly payment into an IVA fund. Then it is divided between your creditors over the term.

The agreement usually lasts between two and five years, but does vary depending upon personal circumstances.

An IVA is legally binding and was introduced by the Government, as part of the Insolvency Act 1986, as an alternative to bankruptcy.

For further explanation on IVA view “Individual Voluntary Arrangement Insolvency Act 1986″.

IVA fees form part of the monthly repayment. Within the monthly payment are the debt repayments.

Individual Voluntary Arrangement (IVA) – How Does An IVA Affect You?

An IVA  affect future income or assets that you receive during the IVA period. For example, if you sell your home whilst in an IVA. The money you receive as equity may require paying into the IVA. Further, increases in your income need reporting to the IP.

Note: An IVA will affect your credit reference.

Who Can Enter Into An IVA – Individual Voluntary Arrangement?

Any adult in England and Wales who is insolvent may apply for an IVA to their creditors for approval.

IVA’s For Employed and Self-Employed – Do differences exist?

IVA’s for employed and self-employed are similar.

Seasonality – Freelancers often experience seasonal trends which affect their income and how the resource of their business is utilised. So when setting out an IVA for a self-employed person, this has to be taken into account.

Acquiring credit for your business. – An employed person in an IVA needs permission from their insolvency practitioner to raise any form of credit over £500. If self-employed, then ordinarily subject to the person issuing the credit facility will be allowed to request a credit account without a fixed limit; however, the creditors require the agreement.

Omitting creditors relating to everyday trade. – Creditors who continually supply a self-employed person will often push for payment past the IVA approval. So, by allowing certain creditors, exclusion from the IVA may cause problems down the line. Careful consideration required by the Licensed Insolvency Practitioner, as this allows a trading creditor a Trojan horse to charge interest and even potential legal action outside of the legally binding IVA.

How Does An IVA Affect Your Credit Rating?

Once in an IVA, you may experience difficulty accessing short term credit. However, you possibly may obtain credit for personal household goods and services.

If you own your own business, you may access credit for business goods and services. However, higher interest charges may apply. So take care not to increase your debt.

Being in an IVA is recorded in The Insolvency Register.

Individual Voluntary Arrangement – How Much Does An IVA COST?

Entering into an IVA means you agree to repay an affordable amount into an IVA fund held by the supervisor of the arrangement. Repayment reflects ability once finished, examining your income and expenditure to calculate your affordability. You then agree on this, with your creditors.

Therefore, remember with an IVA, you only pay your agreed contribution. However, no additional payments to your existing unsecured creditors, as they form part of the arrangement.

The total sum paid to your existing unsecured creditors would come from the arrangement fund. Once the final payment is released, a certificate is then issued. This states you are discharged from the IVA scheme.

Fees are from the agreed contributions. Therefore, the unsecured creditors have to approve these fees before being drawn.

How Long Does An IVA Last?

An IVA can last for any period that creditors agree. However, this is usually six months to five years, depending upon personal circumstances.

Individual Voluntary Arrangement (IVA) – Which debts can you pay off with an IVA?

Included in an IVA:-

  • Tax & National Insurance Contributions.
  • Hire purchase debts
  • Bank overdrafts
  • Catalogue debts
  • Council Tax arrears
  • Any form of legal personal loans
  • Mortgage shortfalls (See below)
  • Unsecured card debt: Credit cards, Store Cards.
  • Various unsecured debt other than above.

Those you can’t pay off using an IVA?

  • Student loans.
  • Magistrate fines.- Speeding fines etc.
  • Court Fines.
  • Car finance secured.
  • Child maintenance or Child Support arrears.
  • Secured Loans.

Mortgage and rent arrears

You are allowed to include mortgage arrears, rent arrears, and other loans secured against your residence in an IVA.

However, creditors need to agree, and this may not happen.

Council Tax Debts?

Once in an IVA, your council tax remains included in the monthly IVA payment.

Payday Loans?

Taking out a payday loan while you are in an IVA may place your IVA at risk. You should first contact the Insolvency Practitioner.

If managing your IVA is a problem, paying the debt you owe money since your IVA?

Can I Set Up An IVA Myself?

No.

Individual Voluntary Arrangement (IVA) – How Do I Set Up An IVA Then?

We have a standard questionnaire which one of our trained insolvency advisors can help you to complete. We also prepare several authorisation letters for you to sign. On their completion, the proposal setting out your intentions is ready. Once you have agreed to its content, we would send it to your unsecured creditors for their consideration. They would then vote on the IVA proposal.

If your creditors agree, one of our Licensed Insolvency Practitioners would be appointed supervisor of the IVA. Once accepted, the IVA becomes a legally binding agreement between you and your creditors.

What Are the Advantages Of An IVA over Bankruptcy?

  • IVAs do not have the same stigma as bankruptcy, so less impact on your reputation.
  • Bankruptcy advertised.
  • An IVA is a private agreement between you and your creditors.
  • You are more likely to lose your assets in bankruptcy than you are in an IVA.
  • Some employment contracts that do not allow an individual to become bankrupt may deem an IVA acceptable.
  • Bankruptcy procedures tend to incur higher costs than those involved in an IVA.

The main disadvantages of an IVA?

  • Your credit rating affected. The IVA remains on your credit report for six years.
  • Equity in your home released.
  • Control over monthly living expenses.
  • Failure to pay affects the surety of IVA.
  • Creditors may refuse the proposal.

Statements and Notices

Complying with the Consumer Credit Act 1974. Any creditors will send you annual statements, together with any arrears and default notices. This takes place even when you commence your IVA, however, ceases once you have exited your IVA as agreed.

However, this does not in any way expose problems with you IVA. Any demands need to be dealt with by your appointed Insolvency Practitioner.

Can I Propose an IVA, If A Bankruptcy Petition Issued Against Me?

You may apply for an interim order. Once granted, it prevents any further court proceedings against you.

Therefore, enabling the proposal of the IVA, which, if accepted by creditors, would prevent any court action already commenced against you from proceeding. However, if a bankruptcy order is issued, an IVA may still be proposed to your unsecured creditors in conjunction with the trustee in bankruptcy.

Individual Voluntary Arrangement (IVA) – Lump-sum IVA. What is it?

An IVA usually is spread over 60 months to ease the burden and affordability.

However, having a lump sum available allows you to agree an IVA lasting shorter.

An IVA remains a legally binding agreement between you (The Debtor) and your creditors.

A lump sum IVA retains the same benefits and risks as a sole IVA.

Will I have to sell my house if I set up an Individual Voluntary Arrangement?

You may need to sell your property. However, you could also release some equity instead. Typically, agreed with creditors before approving the proposal.

May I Continue To Operate My Business, If I Enter Into An IVA?

Yes.

You remain in control of your business, while you adhere to the terms of the IVA agreement.

Individual Voluntary Arrangement (IVA) – Does An IVA Negatively impact My Credit Rating?

A note placed on your credit file, alerting companies to your IVA agreement. You may find it difficult to obtain credit.

What Happens If I Miss Any Payments Into The IVA?

If you miss your agreed payment into the IVA, then your IVA supervisor will contact you to discuss the position. Your IVA proposal would usually state that if two or more payments have defaulted, then the supervisor needs to petition for your bankruptcy.

However, the situation requires discussion with you before any action, to determine if an alternative solution exists, like a revised payment plan. Your creditors must agree with any alterations.

Individual Voluntary Arrangement (IVA) – Will My Creditors Agree To An Individual Voluntary Arrangement?

An IVA approval requires a minimum of 75% of your creditors in voting value need to vote in favour. We therefore work with you to ensure that any IVA arrangement that you propose is a proposal that we believe will need acceptance by your creditors.

Can I cancel an IVA?

To cancel your IVA, you require your insolvency practitioner, and your creditors agree.

Individual Voluntary Arrangement (IVA) – When does an IVA complete? What Happens?

ENGLAND WALES ONLY

The supervisor of your IVA issues you with a ‘Certificate of Completion’, within one month of the final payment.

An IVA, however, shows on your credit file for six years, commencing the date you started your IVA; therefore, you need to restore your credit rating.

Debt Management Plans

What is a Debt Management Plan?

A debt management plan DMP. An agreement between you and your creditors to control and pay your debts. They will help reduce your monthly payments and consolidate this into one affordable amount.

DMP can consolidate outstanding, unsecured debts to help control your finances. A DMP is not a legally binding debt solution. It leaves no footprint on public registers. Therefore, nobody knows.

Administration orders

An administration order deals with personal debt when in receipt of a county court or high court judgement, and you are unable to pay the debt in full.

For an Administration order to exist, the outstanding debt is required to be no more than £5,000.

You remain required to make one payment a month to your local court. The court then divides the sum received among your creditors.

Creditors listed on the administration order are therefore unable to take further action against you without the issuing court’s authority.

Debt Relief Orders

Debt Relief Orders (DROs) deal with your unpaid debts when owing less than £20,000. Further requirements are: You do not have little extra income, and do not own your home.

If your debt relief order dro is approved:

  • Your creditors may not recover money owed to them by you without the court’s permission.
  • typically, released from your debts after twelve months

Get a Debt Relief Order

You arrange a DRO you are required to approach the official receiver. You though do not approach them as you go via an authorised debt adviser.

Costs

The fee is £90.

If you are unable to make this payment, then approach a debt charity for support with the payment.

Eligibility

You’re generally eligible if you meet all these criteria:

  • Your debt is below £20,000
  • £50 or less a month spare income
  • Less than £1,000 assets
  • Not worked or lived abroad in the last three years.
  • Not applied for a DRO in the previous six years.

Restrictions

You need to adhere to restrictions.

Therefore:

  • Borrow over £500 without advising the lender of your  DRO
  • Remain as a company director
  • Start and operate a new company without the court’s authority.

To open a new bank account, you must advise a financial institution of your DRO.

Restrictions last 12 months. If you act dishonestly, then the period may extend.

What you need to know

When in a DRO you are required to pay:

  • Rent and utility bills
  • Student loans, court fines

DROs may cancel due to:-

  • A material change improving your finances.
  • Failure to co-operate with the official receiver.

If you grow your debt after the DRO. Then you face:-

  • a bankruptcy order
  • Prosecution failing to disclose your position.

Note: Once your DRO is approved. Then it is added to the Individual Insolvency Register. – However, note: removed three months after DRO finishes.

Your DRO remains on your report for six years, therefore possibly affecting your credit score.

SCOTLAND

Trust Deed

A trust deed: A legally binding arrangement dealing with unsecured debts only. Examples: credit cards and personal loans. It though does not cover your mortgage or hire-purchase agreements. A trust deed requires setting up by a licensed insolvency practitioner. Once appointed, the practitioner assumes the role of trustee dealing with your creditors.

Alternative ways to deal with your debt

Alternative ways to deal with your debt exist.

A debt-management plan allows you to enter an informal arrangement with your creditors and pay any excess income over to a debt management company. They then negotiate a lessened repayment to your creditors.

However, applying for bankruptcy may offer a suitable solution for you. A bankruptcy provides a court order, ceasing liability for most debts. Though, it may involve the sale of assets to pay creditors. Bankruptcy will also impact on you remaining self-employed until discharged from bankruptcy.

All solutions demonstrate advantages and disadvantages. Therefore, you should assess them carefully before finalising your way forward. Do not jump out of the frying pan into the fire.

So, therefore, choose an insolvency practitioner you trust.

Who then will I deal with at HBG Advisory?

Sandra, a qualified Insolvency Practitioner IP, has for many years helped individuals back on their feet. An excellent listener and will gently guide you through a stressful time. Sandra remains a director of the practice, and her team remain pleased to assist you to step into a less stressful life.

Click on “The Team at HBG Advisory to view Sandra. Please feel free to contact us to ask any questions.


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Seeking support with your under performing business?We can remove all the stress while allowing you to move forward with your business removing the fog for good. Please call us on 0800 612 5448 or Book A Virtual Meeting safe and private. We help directors daily to navigate the complexities of financial difficulty.

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