IVA Frequently asked questions

An individual voluntary arrangement or IVA is a formal agreement between you and your creditors. It is a fixed-term debt plan that legally protects you from your creditors. An IVA freezes interest and cuts your monthly repayments to an affordable level. Better still, any debt left unpaid when the term finishes is written off. The exact amount of your monthly payment will depend on your circumstances but can start from as low as £100. If you are a homeowner, once your IVA is approved your home is protected. If you have a private pension this will also be protected. Typically an IVA will last for 5 years with you making an affordable monthly payment from your income into your IVA. Once your IVA has been fully approved, you don’t need to worry any more about your creditors contacting you. Your insolvency practitioner who supervises your IVA will deal with all your creditors. Once the final IVA payment is made, you are no longer be liable for any of the debts included in your IVA and there will be no further balance to pay, even if this means your debts have not been repaid in full.

Typically the time taken to set up an IVA is between 21 and 28 days. You will need to provide information to your insolvency practitioner and your insolvency practitioner will also obtain information online to confirm values of e.g. your car or your house. As you are making an important financial decision it is important to make sure that you take the time you need to read and understand your IVA proposal and make sure this is the right decision for you.

Here at Bennett Jones, we take time to explain your options to you and we are happy to answer any questions or concerns you may have before you make the decision to proceed with your IVA. Once you have read and approved the IVA proposal you are going to make to your creditors it is necessary to send the proposal to your creditors and allow your creditors at least 14 days to consider and vote on your proposal

Companies and businesses who are authorised by the Financial Conduct Authority to provide debt advice and debt counselling services will provide you with free initial advice. Bennett Jones specialise in providing IVAs for consumers who have unmanageable debts.  There are many debt help resources on this website withing the resources area. Plus there are lots of advice available free of charge from organisations such as the Citizens’ Advice Bureau (www.citizensadvice.org.uk) and the Money Advice Service (www.moneyadviceservice.org.uk).

To qualify for an IVA you would have to owe at least £7,000 to two or more creditors and you would also typically need to be able to afford to pay at least £100 per month towards repayment of your debts after you have paid your day to day living expenses.

There is no upper limit to the amount you owe to your creditors which would prevent you from proposing an IVA. More often than not an IVA is going to be viewed by your creditors as the best option for them to receive something towards payment of their debts than any other method of repayment even though this is likely to mean that you will end up debt free after only repaying some of the outstanding debts which you owe.

There are 2 fees payable to an Insolvency Practitioner for the work involved in an IVA. The first fee is the fee charged by the Insolvency Practitioner for setting up the IVA – known as the ‘Nominee’s fee’ and the second fee is the fee charged by the Insolvency Practitioner for administering the IVA typically for a period of 5 years. This fee is known as the ‘Supervisor’s fee’. An example of the fees and how they are charged is set out below. The fees will be fully explained to you before you proceed with your IVA and they will also be disclosed in your IVA proposal which is sent to your creditors.

The important point to note about the fees and costs of an IVA is that the costs are deducted from your agreed affordable monthly payments. In the example below, you will see that no fees or costs will be payable by you in addition to your agreed monthly IVA contributions.

IVA fees and costs example
60 payments of £150 = £9,000
Less
Nominee’s fee: £1,800
Supervisor’s fee: £1,850
Balance payable to creditors: £5,350

Creditors’ claims: £15,000
% distribution to creditors: 35.67%

No – The IVA is a private agreement between you and your creditors. The IVA documents are not filed with the Court but it is important to note that your IVA proposal must be true to the best of your knowledge. If you make a deliberately misleading or false statement in your IVA proposal this is a criminal offence with the potential risk of a prison sentence. The IVA will however be shown on a public register, the insolvency register. 

There is no limit to the amount of debt which an IVA can write off. Your creditors will vote on your proposal and if the amount of debt you are proposing to write off appears to them to be unreasonable your creditors are likely to vote to reject your proposal. It is important to note that the offer you will be advised to make must always be an offer that is affordable for you after taking into account the amount you need to allocate to pay your day to day living expenses.

At Bennett Jones, we will review your household income and your expenses in line with guidance produced by the Money Advice Service and a set of agreed criteria which are included in the nationally recognised “Standard Financial Statement” We will then discuss with you how much you can realistically afford to offer each month to pay into your IVA while leaving you with a reasonable amount of money to cover payments of your living expenses. Your creditors will not expect you to live in poverty while you make payments to your IVA so they will agree to you spending money on reasonable expenses such as sports and hobbies etc. If you earn extra money from e.g overtime work from time to time you will be expected to contribute some of this money to your IVA but you will also be able to retain at least 50% of the extra money for yourself.

Yes – IVAs were originally envisaged to be an alternative to bankruptcy for self-employed people experiencing financial difficulties. In recent years many thousands of people who are not self-employed have found that an IVA is the right solution for resolving their debts. IVAs remain a good option for many self-employed people who wish to continue trading but are struggling with unmanageable debts. Bennett Jones are experienced at helping small business owners who will benefit from entering into an IVA. We will prepare IVA proposals that explain to your creditors how you expect to generate your future income from which you can afford to pay contributions into an IVA.

You may be surprised to know that you can access lots of information about your debts by simply going online and downloading for free your personal credit report. Experian and Equifax provide a full report of all the debts you owe including credit card debts, personal loans, car finance, mortgages and secured loans. You can also find out your credit score which will provide you with helpful information about how lenders will view any applications you may make to them at the present time for new credit.

When you enter into an IVA you decide how much you are willing to offer to your creditors as a monthly payment for a fixed period of time – typically 60 months. Clearly, your offer must be realistic and something which is reasonable as far as your creditors are concerned. It is important to understand that your creditors do not expect you to live in poverty for the duration of your IVA. The team at Bennett Jones will help you set a budget for reasonable living expenses including providing for spending on leisure activities and unexpected expenses which will inevitably arise at some time or other. Once you are happy that your budget covers all your day to day expenses you can decide how much you are willing to offer as a monthly IVA payment. The team at Bennett Jones will work with you to ensure that any offer you make is both affordable for you and also is likely to be accepted by your creditors.

If you owe money to the bank you use for your day to day transactions it might be necessary for you to set up a new bank account. Nowadays this process is quick and easy to undertake. The team at Bennett Jones will provide you with useful guidance and assistance to help you with any concerns you may have.

Immediately after your IVA is approved all interest on your unsecured debts and all charges will be frozen. It is important to note that debts such as mortgages or ongoing car finance will not be included in your IVA and you will continue to pay these as normal. After your IVA is approved you may continue to receive correspondence from some of your creditors. All you need to do is to send this to Bennett Jones who will remind those creditors to update their records to show that you are in an IVA and they must only deal with your IVA supervisor from now on. If your IVA is terminated because you don’t keep to the agreed terms then the interest which was frozen is likely to be added back to your debts.

At Bennett Jones we have helped thousands of people become debt free by entering into IVAs. Over several years we have built up solid working relationships with many creditors and their agents. This means that we can tell you with confidence how your creditors are likely to react to your proposal for an IVA. We will only recommend you proceed with your IVA proposal if we are confident your creditors will approve it.

Yes – Your IVA is a confidential agreement between you and your creditors. The record of you entering into an IVA will be registered on the Insolvency Register which is managed by the Insolvency Service a Government agency. This means that if anyone wishes to see if you have entered into an IVA they can search this register with details of your name. The terms of your IVA as agreed with your creditors are not made public and will remain confidential between you and your creditors.

Yes – There are many people who enter into IVAs while not receiving income from paid employment. You should consider whether other solutions for resolving your debts may be appropriate for your circumstances such as e.g. a Debt Relief Order. If you are happy that you can afford to pay contributions to your IVA and your Insolvency Practitioner agrees with you that your budget for living expenses is realistic there is no reason why you should not go ahead and propose an IVA to your creditors.

The major banks and credit providers have agreed to abide by the terms of a “Protocol” which provides an agreed standard framework for dealing with straightforward consumer IVAs and applies to both IVA providers and creditors. As part of the protocol, the major banks and credit providers have agreed that there will be NO circumstances in which a person who is proposing an IVA will be made to sell their house. The Protocol envisages that in certain circumstances a person who is a house owner may be expected to try and realise funds by obtaining an affordable remortgage. In our experience more than 90% of people who are homeowners and subject to IVAs complete their IVAs without having to obtain any form of remortgage.

If you are driving a car which is clearly excessively expensive for your reasonable needs then your Insolvency Practitioner may recommend that you sell your car and downsize to a more reasonable model. If you are using a standard car, often subject to finance, you will be able to continue as normal. The Bennett Jones team are experienced in this area and if they have any concerns about your car these will be explained to you before you commit yourself to an IVA.

Your IVA will be registered on your credit record and it will stay on the register for the period of your IVA and for up to 12 months after your IVA has concluded. The effect of your IVA on your credit rating will depend to some extent on what your credit rating was like before your commenced your IVA.

If you have asked anyone else to guarantee the payments of a loan your IVA will trigger a default of the loan agreement and this is likely to result in the lender contacting your guarantor and asking the guarantor to repay the loan. Your IVA is a private agreement between you and your creditors. You will be fully aware of the terms of your IVA agreement and its impact on your personal financial position. No one else will be affected by your IVA apart from the possible impact of the IVA on guarantors.

The only people who will know about your IVA are your Insolvency Practitioner and his team and your creditors. The record of you entering into an IVA will be registered on the Insolvency Register which is managed by the Insolvency Service a Government agency. This means that if anyone wishes to see if you have entered into an IVA they can search this register with details of your name. The terms of your IVA as agreed with your creditors are not made public and will remain confidential between you and your creditors.

“Joint IVAs” or “Interlocking IVAs” are IVAs that are proposed typically by 2 people who jointly owe debts to several creditors. In these circumstances it is sometimes more practical and fairer for all parties for IVAs to be proposed on the basis that the contributions into the IVAs should be paid into a central “pot”. The funds which are paid into this “pot” are then proposed to be distributed pro-rata between all creditors of each person’s IVA. Each individual must still comply with his or her obligations and maintain the payments as proposed for the IVAs to succeed. If one of the parties to an interlocking IVA defaults on their IVA payments this is likely to result in both of the interlocking IVAs failing.

Yes – IVAs were originally envisaged to be an alternative to Bankruptcy with a view of promoting an “Enterprise” culture. There are no restrictions on you becoming or continuing to be a company director if you are subject to an IVA. If you became bankrupt you would be prohibited from acting as a company director until you were discharged from bankruptcy.

All your debts should be mentioned and detailed in your IVA proposal. Your IVA will include all your unsecured debts other than debts such as Court Fines. If you owe money to members of your family or personal friends these debts would normally only be included in your IVA if there is enough money left after your other creditors and the costs of your IVA have been paid in full. For practical purposes, this is likely to mean that in most cases debts owed to friends and family will not be included in your IVA.

Secured debts such as mortgages and secured loans and car finance will not be included in your IVA as the mortgagee or secured lender will continue to be able to enforce payment by taking possession proceedings if payments are not made when they are due to be paid.

You will be able to include debts that are owed to the Department of Work and Pensions and HMRC for outstanding Income Tax and National Insurance Contributions. If you have incurred arrears of Council Tax and utility bills these can also be included in your IVA. The team at Bennett Jones will guide you and inform you whether it is realistic for your IVA to be approved in circumstances where such debts are a large percentage amount of the total of your unsecured debts.

Your IVA can include a CCJ, even if your creditors have obtained CCJs against you and they have commenced efforts to enforce payment by for example instructing bailiffs these debts will still be included in your IVA. Once your IVA has been approved all enforcement action by all of your creditors must cease.   The Insolvency Act specifically provides that all enforcement actions must cease once your IVA has been approved.