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Understanding: Is An IVA A Government Approved Scheme ?

Individual Voluntary Arrangement (IVA) is a debt solution that has gained popularity among individuals facing financial challenges. It is often touted as a viable alternative to bankruptcy, offering a structured repayment plan that allows individuals to manage their debts more effectively. However, a common question that arises is whether an IVA is a government-approved scheme. In this article, we’ll delve into the details to provide clarity on the status of IVAs and their approval by government authorities.

What is an IVA? An Individual Voluntary Arrangement is a formal and legally binding agreement between an individual and their creditors. It allows individuals to repay their debts over a fixed period, usually five to six years, based on what they can reasonably afford. The arrangement is facilitated by a licensed insolvency practitioner who acts as a supervisor, overseeing the implementation of the IVA and ensuring compliance with its terms.

Government Oversight: While IVAs are not directly approved by the government, they are regulated by existing insolvency laws in the United Kingdom. The government sets the legal framework within which IVAs operate, ensuring that they adhere to specific guidelines and standards. The Insolvency Act 1986 and subsequent amendments outline the legal basis for IVAs, offering protection to both debtors and creditors involved in the arrangement.

Licensed Insolvency Practitioners: One of the critical components of an IVA is the involvement of a licensed insolvency practitioner (IP). These professionals are regulated by recognized professional bodies, such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Insolvency Practitioners Association (IPA). Government-approved regulatory bodies oversee these organisations, ensuring that IPs adhere to strict ethical and professional standards.

Approval Process: To initiate an IVA, a licensed insolvency practitioner assesses the individual’s financial situation and proposes a repayment plan to creditors. Creditors then vote on whether to accept or reject the proposed arrangement. For an IVA to be approved, it requires the support of a significant majority of creditors, representing at least 75% of the total debt value. Once approved, the IVA becomes legally binding on all parties involved.

Benefits of an IVA: The government’s indirect approval of IVAs lies in the recognition of their benefits in helping individuals overcome financial difficulties without resorting to bankruptcy. IVAs offer several advantages, including:

Debt Repayment: Individuals can repay a portion of their debts through affordable monthly payments.
Legal Protection: Once approved, creditors are bound by the terms of the IVA, preventing legal actions and harassment against the debtor.
Asset Preservation: Unlike bankruptcy, which may lead to the sale of assets, an IVA allows individuals to retain ownership of their assets, including their home.

Conclusion: While an IVA itself is not a government-approved scheme, it operates within the legal framework established by the government. The regulatory oversight provided by licensed insolvency practitioners and adherence to insolvency laws ensure that IVAs are legitimate and effective solutions for individuals facing financial challenges. Before considering an IVA, it is essential to seek professional advice and thoroughly understand the implications and obligations associated with this debt management option.

How Much Debt Does An IVA Write Off ?

Introduction: In the realm of financial challenges, Individual Voluntary Arrangements (IVAs) have emerged as a viable solution for individuals grappling with overwhelming debt. An IVA acts as a lifeline for those drowning in financial distress, offering a structured approach to managing and ultimately alleviating debt burdens. One of the burning questions surrounding IVAs is just how much debt they can write off. Let’s delve into the specifics to shed light on this crucial aspect of debt relief.

What is an IVA? An Individual Voluntary Arrangement is a formal agreement between a debtor and their creditors. It provides a legal framework for repaying a portion of the debt over a fixed period, typically five to six years. During this time, the debtor makes affordable monthly payments to an insolvency practitioner, who then distributes the funds among the creditors. Once the agreed-upon period expires, any remaining debt covered by the IVA is legally written off, offering the debtor a fresh financial start.

The Debt-Writing Mechanism: The amount of debt an IVA can write off varies depending on several factors, including the debtor’s financial situation, the total debt amount, and the agreed-upon terms of the arrangement. IVAs are tailored to individual circumstances, ensuring that the monthly payments are realistic and affordable for the debtor.

During the IVA term, creditors are bound by the agreement and cannot pursue legal action or demand additional payments beyond what has been established. This freeze on interest and charges, combined with a structured repayment plan, allows debtors to regain control of their finances without the constant pressure of escalating debts.

Common Types of Debt Covered: IVAs are particularly effective in dealing with unsecured debts, such as credit card debt balances, personal loans, and overdrafts. These types of debts are often the primary contributors to financial distress, and an IVA provides a systematic approach to managing and eventually eliminating them.

While IVAs do not cover secured debts, like mortgages or car loans, successfully addressing unsecured debts can significantly alleviate financial strain, making it more manageable for individuals to meet their other financial obligations.

Factors Influencing Debt Write-Off: The percentage of debt written off through an IVA depends on the debtor’s financial circumstances and the creditors’ willingness to accept the proposed terms. Typically, debtors aim to repay a percentage of their total debt, often ranging from 25% to 50%, with the remaining balance being legally written off at the end of the agreed-upon term.

Negotiation Skills: The success of an IVA in writing off a significant portion of debt also relies on the negotiation skills of the insolvency practitioner representing the debtor. Skilled negotiators can work with creditors to secure favorable terms, maximizing the debt relief for the individual seeking financial recovery.

Conclusion: Individual Voluntary Arrangements offer a lifeline to those drowning in debt, providing a structured and legal framework for repayment. The amount of debt that an IVA can write off is contingent on various factors, including the debtor’s financial situation, the total debt amount, and the negotiated terms. While there is no one-size-fits-all answer, the potential for substantial debt relief makes IVAs an attractive option for individuals seeking a fresh financial start. It’s crucial for individuals considering an IVA to seek professional advice to navigate the complexities of the process and ensure the best possible outcome for their unique circumstances.

How To Find The Best IVA Company UK

In the intricate landscape of IVA’s and Debt Management, finding the right Individual Voluntary Arrangement (IVA) company is crucial. Making an informed choice can significantly impact your financial future. This article serves as a compass, guiding you through the process of identifying the best IVA company tailored to your needs.

Research and Reviews: Start your journey by delving into online research. Visit reputable financial websites and forums where individuals share their experiences with different IVA companies. Pay attention to reviews, testimonials, and ratings to gauge customer satisfaction and the company’s track record.
Seek Recommendations: Personal referrals can provide valuable insights. Reach out to friends, family, or colleagues who may have encountered financial challenges and sought the assistance of an IVA company. Their firsthand experiences can offer practical perspectives and help you narrow down your options.
Check Accreditation and Regulatory Compliance: Before committing to any IVA company, ensure they are accredited and compliant with relevant financial regulations. Look for certifications from recognized industry bodies, such as the Insolvency Practitioners Association (IPA) or Financial Conduct Authority (FCA). This assures you that the company adheres to ethical standards.
Verify Experience and Expertise: An IVA involves intricate negotiations with creditors and a deep understanding of financial laws. Choose a company with a proven track record and substantial experience in managing IVAs. Inquire about the expertise of their professionals and their success rates in facilitating favourable arrangements for clients.
Transparency in Fees and Terms: Scrutinise the fee structure and terms of service. A reputable IVA company should be transparent about their charges and provide a clear breakdown of costs. Avoid companies that have hidden fees or unclear terms that could lead to financial surprises down the road.
Client-Centric Approach: Opt for an IVA company that prioritises a client-centric approach. During initial consultations, assess their willingness to understand your unique financial situation. A company that takes the time to comprehend your challenges is more likely to tailor an IVA solution that aligns with your needs.
Communication and Support: Effective communication is pivotal throughout the IVA process. Evaluate the responsiveness and support system of the company. A reliable IVA company should offer clear channels of communication and be accessible to address your concerns and queries promptly.

Conclusion: Finding the best IVA company is a pivotal step toward reclaiming financial stability. By conducting thorough research, seeking recommendations, and prioritising transparency and expertise, you can navigate the complexities of debt management with confidence. Remember, the right IVA company is not just a service provider but a partner in your journey toward financial recovery.

Including Council Tax Into An IVA

Can council tax be included into an IVA

Yes, for individuals struggling with debt in the UK, the prospect of including council tax payments in an Individual Voluntary Arrangement (IVA) can provide a lifeline. An IVA is a formal and legally binding agreement between an individual and their creditors to repay a portion of their debts over an agreed period. While council tax is a priority debt, it can still be included in an IVA, offering a structured path to financial recovery.

Understanding Council Tax Arrears

Council tax is a local tax levied by local authorities in the UK to fund essential public services such as rubbish collection, street cleaning, and local schools. Falling behind on council tax payments can have serious consequences, including legal action and additional charges. Including council tax in an IVA can be a strategic move to address arrears and establish a manageable repayment plan.

The IVA Process and Council Tax

Assessment of Financial Situation

Before including council tax in an IVA, individuals undergo a thorough assessment of their financial situation. This includes a detailed examination of income, expenses, assets, and debts. The appointed Insolvency Practitioner (IP) works closely with the individual to create a realistic repayment plan that considers all outstanding debts, including council tax.

Negotiation with Creditors

The Insolvency Practitioner then engages in negotiations with creditors, seeking their approval for the proposed IVA. This includes presenting the case for including council tax in the arrangement. Creditors may agree to the IVA if they believe it offers a more favourable outcome than alternative debt recovery methods.

Setting up the IVA

Once creditors approve the IVA proposal, a formal agreement is established, outlining the terms and conditions of the arrangement. This legally binding document includes details on the agreed monthly payments, the duration of the IVA, and the distribution of funds to creditors, including the portion allocated for council tax.

Regular Payments and Monitoring

Individuals in an IVA are required to make regular monthly payments as per the agreed-upon schedule. The IP monitors the payments and ensures that the funds are distributed to creditors accordingly. Including council tax in the IVA provides a structured framework for addressing this priority debt alongside other financial obligations.

Benefits of Including Council Tax in an IVA

Legal Protection

Once an IVA is in place, individuals benefit from legal protection against further action from creditors, including local authorities pursuing council tax arrears.

Structured Repayment Plan

Including council tax in the IVA allows individuals to create a structured and affordable repayment plan, making it easier to manage multiple debts.

Avoiding Legal Action

By proactively addressing council tax arrears through an IVA, individuals can avoid the potential legal consequences associated with non-payment of this priority debt.

Conclusion

Including council tax in an IVA offers a strategic and legally sound approach to managing debt in the UK. Through careful assessment, negotiation with creditors, and the establishment of a structured repayment plan, individuals can address council tax arrears while working towards overall financial recovery. Seeking the guidance of a reputable Insolvency Practitioner is essential to navigate the complexities of the IVA process and achieve a sustainable path towards a debt-free future.

Is An IVA Better Than Bankruptcy

Whether an Individual Voluntary Arrangement (IVA) is better than bankruptcy depends on your specific financial circumstances and goals.

An IVA is a legally binding agreement between you and your creditors to pay off your debts over a set period of time. It allows you to avoid bankruptcy and keep your assets, such as your home, provided you keep up with the payments. IVAs typically last for five to six years and any remaining debt is written off at the end of the term.

Bankruptcy, on the other hand, is a legal process that can be a quicker way to get rid of your debts, but it can also come with more severe consequences. Bankruptcy can lead to the loss of assets, including your home, and can affect your credit rating for several years.

So, if your main concern is protecting your assets and avoiding the long-term impact on your credit rating, an IVA may be a better option. However, if you have few or no assets to protect and need a fresh start as soon as possible, bankruptcy may be a better option.

It’s important to note that both options come with advantages and disadvantages, and you should seek professional advice from a debt advisor or insolvency practitioner to help you decide which option is best for you.

What If I Am A Homeowner?

On the one hand, bankruptcy can provide relief from debt and stop any legal action against you, including repossession or foreclosure proceedings on your home. However, depending on the value of your home and the amount of equity you have in it, you may be required to sell it as part of the bankruptcy process to pay off your creditors.

Additionally, bankruptcy can have a significant impact on your credit score and remain on your credit report for up to ten years, which can make it more difficult to obtain credit or loans in the future.

If you’re considering bankruptcy and are a homeowner, you may want to explore other options such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) before making a final decision.

An IVA may allow you to keep your home and make manageable payments towards your debts over a set period of time. A DMP can also help you repay your debts over time, but without the legal protection of an IVA or bankruptcy.

How Long Does Bankruptcy Take To Clear My Debts?

Bankruptcy usually lasts for a period of 12 months, after which most of your unsecured debts are discharged. However, it’s important to note that some debts, such as student loans, court fines, and child support payments, are not typically included in bankruptcy and will still need to be repaid.

During the 12-month period of bankruptcy, a trustee will be appointed to manage your finances and sell any assets that are not protected by law to repay your creditors. Any remaining debts will be written off at the end of the 12-month period, allowing you to start afresh.

It’s important to note that bankruptcy can have long-lasting effects on your credit score and financial history. The bankruptcy will remain on your credit report for a period of six years from the date it was declared, which can make it more difficult to obtain credit or loans in the future.

5 Signs You Might Be Facing Bankruptcy

Here in the UK, debt is a national crisis affecting people from all walks of life. And when debt really gets out of control, declaring bankruptcy is often the only viable option for dealing with them. On the plus side, bankruptcy and other forms of personal insolvency, such as IVAs and DROs, don’t carry the stigma that they once did.

If bankruptcy turns out to be the best way to manage your debts, there’ll be some difficult times ahead – but you could walk away from your money problems just 12 months after your Bankruptcy Order is made. This article looks at 5 common warning signs that bankruptcy might be just around the corner.

You’re relying on credit to make ends meet

In recent years, static wage and salary levels combined with rising living costs have left many people trapped in a vicious circle of never-ending debt. And if you’re spending more than you earn each month, you’ve got problems. Whether you’re relying on credit cards, bank overdrafts, payday loans or even all three, the situation won’t go away on its own, so it’s time to seek expert help.

Your credit cards are always maxed out

Thanks to irresponsible lending practices that the FCA is trying to stamp out, many people have ended up with combined credit card limits that out-strip their annual incomes several times over. And if temptation proves too much, you could find yourself with a mountain of debt and no realistic way of paying it off.

A key warning sign is only ever paying the minimum payment because that’s all you can afford. You might feel that by doing this you’re keeping your head above water, but in reality, you could be heading for serious trouble.

You’re avoiding your creditors

If you’re leaving bills and reminders unopened, avoiding creditor phone calls and not answering the front door bell, then things have got out of hand. You need to stop sticking your head in the sand and hoping the problem will go away on its own. As soon as bankruptcy, or any other form of personal insolvency, is put in place, your creditors will be legally obliged to leave you alone. So, the sooner you take action to tackle your debts, the sooner the harassment will stop. The ball’s in your court.

You’re worrying excessively about your debts

Everyone worries about money every now and again. But your debts shouldn’t be keeping you awake at night, giving you nightmares or distracting you from work or other activities. It’s a sad fact that being in debt is often linked with the development or worsening of mental health problems such as anxiety and depression, which can have serious long-term consequences for your health.

So if you’re feeling overwhelmed by your debts, or your money problems are dominating your life, it’s crucial to seek professional debt advice straightaway. Trained debt advisers are fully aware of the health problems that debts can cause. They’ll discuss your situation with you in confidence and can refer you to appropriate support services if required.

You receive a repossession notice

You probably know that your home can be repossessed if you don’t keep up with your mortgage payments, or repayments of any other loan that’s secured on it. But did you know that your unsecured creditors, such as credit card providers and payday loan companies, can also take steps to repossess your home or other assets?

This can happen under the following circumstances:

Your creditor takes out a County Court Judgement (CCJ) against you and then applies for a charging order to enforce it, and
The charging order is made final (it’s a two stage process) and you don’t comply with the terms and conditions required by the court, and
You’ve missed payments that the court ordered you to pay on the CCJ.

If you’ve had a charging order made against you, this means that the court has ordered the amount of your unsecured debts to be secured against the value of your home or another asset. In most cases, your creditors will happily wait for you to sell the asset in question before collecting what’s owed to them. But under the circumstances described above, they can try to make you sell the asset immediately.

Receiving a charging order is itself a sign that your debts are severe, but a repossession order takes things to a wholly different level. It’s imperative to consult a qualified debt counsellor or licensed insolvency practitioner for advice as soon as possible.

3 Ways To Clear Your Debts Yourself

If you can no longer afford to meet your credit commitments, you need to act fast to get things under control. There’s no use burying your head in the sand, as the problem won’t go away on its own. However, the good news is that are plenty of options available to help you clear your debts.

What’s the best debt solution for me?
The right solution for you will depend on your individual circumstances. For example, the size and type of your debts, whether you own your home and how much (if anything) you can afford to repay your creditors.
There’s a huge amount of information out there about the different debt management solutions and how they work, and it’s easy to feel confused or overwhelmed. That’s where speaking to a qualified debt adviser can help.

Three of the most common debt solutions that might be available to you are:
1. Debt management. This might be a suitable choice if you owe unsecured debts such as credit cards and payday loans that total more than £3,000 and you’re able to pay your creditors at least £100 a month. It might take you a while to pay off your debts, but we may be able to get your creditors to freeze interest and charges on your accounts, relieving some of the pressure. Debt management is also an informal solution that offers more flexibility than some other options.

2. Individual Voluntary Arrangement (IVA). You could consider an IVA if you owe more than £8,000 in unsecured debts to multiple creditors and can afford to pay your creditors at least £100 a month. Unlike debt management, an IVA is legally binding and you must stick with it for five or six years. On the plus side, you’re unlikely to lose your home if you own your property and you’ll have legal protection from your creditors. Best of all, any leftover debts within the IVA will be cancelled when it ends – helping you clear your debts once and for all. Read more.

3. Bankruptcy. Forget the old-fashioned stigma around bankruptcy. Times have
changed and it’s now potentially a viable option for anyone with serious debts and little or no assets or income with which to repay them. Yes, there are still restrictions and implications that you’ll need to consider very carefully before going ahead. But if, like many bankrupts, you end up being discharged after 12 months, you could be leaving most or all of your debts behind in just a year’s time. And of course, our team will be on hand to support you every step of the way, from helping with the paperwork to offering advice on your court appearance.

Of course, there are many other ways of dealing with debt. These include:
 An Administration Order
 A Debt Relief Order (DRO)
 Consolidating your debts
 Full and final settlements
 Token payments (a temporary measure).

How do I get started?
Simply get in touch with NationalDebtLine. who will be able to provide you with further guidance. Once you’ve decided how to clear your debts, their expert advisers will implement your chosen solution and offer ongoing help and support.

IVA And Your Credit Rating

If you’re already having debt problems, the chances are your credit rating has already been adversely affected. However, your choice of debt solution could make a difference to your future credit applications, so it’s important to bear this in mind if, for example, you want to apply for a mortgage at some point.

What information appears on your credit file?

If you choose an informal Debt Management plan vs an IVA, it’s possible that this won’t appear on your credit file at all. However, your creditors might ask for a note to be added about your plan. In a way, this could work in your favour as it shows that you’re taking positive action and are committed to paying off your debts.

On the other hand, if the plan isn’t marked on your credit file, you could continue to accrue adverse payment information on the debts you’re paying off. This is because you’ll be paying a lower amount each month than shown in the original credit agreement, which could be recorded as missed payments on your credit file. If this happens and the debts end up defaulting, this information will stay on your file for six years from the date of default.

For an IVA, Bankruptcy and other forms of personal insolvency, the start date will always be marked on your credit file. When your insolvency period comes to an end, another record will be added. These records will both be removed six years after the start date, unless there are unusual circumstances such as a Bankruptcy Restrictions Order.

What happens during the six year period?

During the six years that adverse information appears on your credit file, you’ll find it harder and more expensive to obtain credit. If you’ve been made insolvent, you may also be subject to restrictions around applying for credit during the initial period when your bankruptcy, IVA or DRO is in place.

In any case, it’s a good idea to get your existing debts completely cleared before you even think about applying for more credit. If you’re in an IVA plan, this means waiting until the arrangement or plan has completely finished – which could take six years or more anyway.

What happens after the six year period?

Once the adverse information has dropped off your credit file, you may find it easier and less expensive to obtain credit. However, some lenders will require you to disclose whether you’ve ever been declared bankrupt or insolvent, so you’ll need to be honest about this.

And if you apply to lenders to whom you’ve previously been in debt, you may find they won’t lend to you, as they could still have details of your debts on file.

Regarding mortgage applications, it’s important to note that all forms of personal insolvency could affect your chances of obtaining a mortgage – not just bankruptcy. Your best bet is to speak to a mortgage broker who specialises in helping people with poor credit histories, as they’ll be able to recommend suitable lenders to approach.

When can I start to repair my credit rating?

You can start repairing your credit rating as soon as any restrictions around applying for credit have been lifted. In the case of bankruptcy or a DRO, this could be just 12 months after the order is made against you. However, as already noted, it will be another five years before this information is removed from your credit file, so you may find there’s nothing you can do for the time being.

On the other hand, if you can find a provider that’s willing to lend to you (and your old debts have been wiped out by the DRO or Bankruptcy Order) – go ahead. The sooner you can start building up positive credit information, the better. Start small with a credit card that’s designed for people with poor credit histories. Use it sensibly for small transactions and pay off the balance in full every month. In time, you could try applying for a mobile phone contract or pay-monthly car insurance policy. But be very careful not to over-stretch yourself!

Adding New Debts To An IVA

When you decide to enter into an IVA, you’ll be asked to disclose all your unsecured debts so they can be included into your IVA. These include debts run up on credit and store cards, payday and personal loans, bank overdrafts and catalogue accounts. You’ll also need to list arrears from everyday living expenses such as overdue rent, Council Tax and utility bills, as well as any overpaid benefits or tax credits.

However, despite your best efforts, you might end up accidentally missing some of your debts off the list. This might be because you’ve simply forgotten about them, or because you’ve not heard from the lender for such a long time that you assume the debt has been written off.

Whatever the reason, these ‘forgotten’ debts will need to be addressed, so it’s important to tell the licensed Insolvency Practitioner (IP) who manages your IVA about them as soon as they come to light. What happens next will depend on several factors.

The size of the debt

If the new debt is worth less than 15% of the total amount of debt already included in the IVA, your IP should be able to add it into the IVA without consulting your creditors. If the debt amount is over 15%, your IP will need to get permission from your creditors before adding it in.

They’ll do this by calling a variation meeting and asking your creditors to vote whether or not to accept the new debt. Other factors may also be discussed, such as a change in your monthly payment amount or an extension of the IVA term. Just like at the original creditors’ meeting, the variation(s) will only be approved if at least 75% of your creditors vote in their favour.

Whilst some renegotiation may be required, evidence suggests that most creditors are happy to accept new debts into an existing IVA – even if this means they receive less money in the long run. The obvious reason for this is that rejecting the new debt could cause the IVA to fail and they could end up receiving nothing.

NB. Once a new debt has been accepted into an existing IVA, the ‘forgotten’ creditor is bound by its terms in the same way as your other creditors and can’t take any other action against you to recover the debt. If the new creditor isn’t happy with the IVA’s terms, they have 28 days from the date they were told about it to challenge the IVA if they wish.

The type of debt

Benefit and tax credit overpayments are two of the commonest ‘new’ debt types that people ask to introduce into an existing IVA. This is because you may not have known that you were being overpaid when the IVA was set up. Provided that the overpayment wasn’t a result of fraud, the amount will be dealt with following the process set out above.

If fraud was involved, then this will be investigated by the relevant organisation, such as HMRC. This could result in civil or criminal proceedings being taken against you, which could see fines being added to the amount you already owe. You can’t add the overpaid amount or any resulting fines to your IVA.

Whether the debt is accepted into the IVA

In some cases, your existing creditors won’t accept the new debt into the IVA and you’ll have to find a different way of dealing with it. For example, you or a debt adviser could try to negotiate a repayment plan with the ‘forgotten’ creditor that you can afford on top of your IVA payments. If this isn’t possible, your IVA will probably fail.

If your IVA fails, your options are somewhat limited. They include:

Bankruptcy or a Debt Relief Order (DRO) if you don’t own your home. A DRO has very strict eligibility criteria, such as having a maximum debt of £20,000, but the fees are much lower than for bankruptcy.
If you own a home or other expensive assets, you could consider selling these and using the proceeds to pay off your debts. If the amount isn’t enough to clear your balances in full, you or a debt adviser could try and negotiate full and final settlements with your creditors. This involves persuading them to accept a single, one-off lump sum against the debt amount and cancelling the remaining balance.
Borrowing money from family or friends to enable you to clear your debts or offer your creditors a full and final settlement. If you choose this option, you’re advised to approach the loan formally and put a written agreement in place stating the repayment terms and what will happen if you can’t repay the debt.

Brand new debts incurred after your IVA has started

Moving on to a slightly different topic, it sometimes occurs that a person with an IVA in place manages to obtain additional credit during the IVA’s term. If this happens and you then default on the loan, you’ll have broken the terms of your IVA and it will probably fail. Your options will then be the same as set out above.

Debts that arise after an IVA has finished

It’s rare that a ‘forgotten’ debt will resurface after an IVA has run its course. However, if this happens, the creditor is legally entitled to receive the same amount as they would have been paid through the IVA. You’ll need to contact your IP to find out how much you owe them and discuss how to make payment.

What’s Best -Debt Management Or An IVA ?

Debt management or an IVA?

We’re often asked about the differences between Debt Management and Individual Voluntary Arrangements (IVAs). It’s certainly true that there are some common elements, which is where confusion can arise. However, there are also a number of key differences which we will explain to help you consider which solution might suit you best.

Your debt amount and repayments

You’ll need to owe at least £3,000 in unsecured debts such as credit cards and loans to qualify for Debt Management. For an IVA, the amount owed will normally be at least £8,000, owed to at least two unsecured creditors.

With both solutions, you’ll need to be able to repay at least £100 a month. The amount you can afford to repay will be calculated by your debt adviser. They’ll also work out the proportion of each monthly payment that should go to each creditor. The resulting information will be used to create repayment proposals for your creditors.

Note that neither Debt Management nor an IVA can be used to pay off secured debts, such as mortgage arrears. You’ll need to pay these separately, or consider a solution which includes this type of debt, such as bankruptcy.

Informal vs. formal

Many people are attracted to Debt Management because it’s an informal option. It can be set up and managed without an Insolvency Practitioner (IP) or the courts. No one needs to know about your plan, so you can keep it private. You can cancel it at any time, or change the amount of your monthly payments if your finances change. However, the informal nature of Debt Management also means your creditors can still take you to court at any time.

On the other hand, an IVA is a formal solution that can only be set up and managed by an IP. Both you and your creditors are legally bound by its terms and they can’t take you to court once the IVA is in place. You’ll need to make all your payments on time and comply with the IVA’s terms, or your creditors could try to force you into bankruptcy. As with Debt Management, it may be possible to increase or decrease your monthly payments if your finances change.

Fees

You’ll need to pay set-up and management fees for both solutions. However, these will be included within your monthly payments. The fees involved are based on each persons individual circumstances.

Creditor acceptance and contact

As you’d expect from an informal solution, your creditors aren’t obliged to accept a proposed Debt Management plan. And whilst they may agree to freeze interest and charges, they’re not obliged to do so. However, our debt advisers will do our best to negotiate favourable terms. Even if not all your creditors accept our proposals, the plan may still go ahead. And once it’s in place, we’ll distribute your monthly payments and deal with your creditors on your behalf, making life a little easier for you.

For an IVA to go ahead, at least 75% of your creditors (by debt value) must agree to your IP’s proposals. If the IVA is approved, any creditors who voted against it will still be bound by its terms, and interest and charges on your accounts must be frozen. As with a Debt Management plan, your IP will take over all contact with your creditors and distribute your monthly payments on your behalf.

Time period

There’s no set time period for Debt Management – it depends on how much you owe and the new payment amounts that we’ll negotiate for you. Once the plan is in place, it will continue until your debts have been cleared in full. It’s important to note that you could end up making payments for longer, and repaying more in total, with Debt Management than under your original credit agreements.

An IVA runs for a set time period, usually 60 months. After this time, provided you’ve paid on time every month and complied with its terms, the IVA will end and any remaining unsecured debts within it will be written off. (This is why an IVA can be a better option for people with large debts that could take a long time to clear with Debt Management). However, if you miss any payments, your IVA may be extended or could fail.

Your home

You can apply for Debt Management or an IVA whether or not you own your home. An IVA is different from bankruptcy in that you can usually stay in your home. However, you’ll normally be asked to release equity or re-mortgage the property for the benefit of your creditors. If this isn’t possible, the IVA may be extended for another 12 months.

Choosing Debt Management can be more risky for homeowners as your creditors could try to repossess your home through the courts at any time. However, this is less likely if all your unsecured creditors accept the plan and you stick to your monthly payments.

Please note that, whatever happens with your Debt Management plan or IVA, you’ll still be at risk of having your home repossessed if you don’t keep up with your mortgage or other loan repayments that are secured on it.

Your credit rating

Both solutions are likely to affect your credit rating, although this may well be poor anyway. An IVA will remain on your credit file for up to six years from the start date, which could make it harder to get credit in the future. You’ll also be restricted from obtaining more unsecured credit during the IVA, as part of its terms.

With Debt Management, your plan won’t be mentioned on your credit file, but your loans and agreements may be shown as being in default, which could affect your ability to get credit for a while.

Plan or arrangement failure

If you don’t make all your monthly payments on time, or comply with all the terms of your IVA, your Debt Management plan or IVA could fail. If this happens, your creditors will be free to pursue you through the courts for repayment, which could include trying to repossess your home or force your bankruptcy.

This is why it’s so important tell your IVA company about any issues that prevent you from, or make it hard, to meet your monthly payment commitments. You may be able to reduce your Debt Management or IVA payments, if your creditors agree to this, so please talk to them as soon as any problems arise.