If you live in England, Wales or Northern Ireland and are struggling with unsecured debts, an IVA could be a suitable solution. To be eligible, you need to have a consistent surplus income after covering your essential living costs, which can be used to make monthly payments. Alternatively, if you have access to a lump sum, you may be able to offer this to creditors as part of a Full and Final IVA.
There are no upfront fees to enter an IVA with PayPlan. The costs associated with setting up and managing the arrangement are included within your agreed monthly payments. These fees are clearly outlined in your IVA proposal, so you know exactly what to expect. Learn more about IVA fees and how they work.
You can include a wide range of unsecured debts in an IVA.
This includes:
- Bank account overdrafts
- Loans from finance companies
- Credit or store card balances
- HMRC debts, such as outstanding tax and VAT
- Personal loans from family and friends
- Shortfalls on hire purchase agreements where the goods are no longer in your possession
Secured debts, such as mortgages, still need to be paid separately. Other debts that typically can’t be included are child maintenance arrears and student loans.
An IVA is an individual agreement and doesn’t directly affect your partner. However, if you have joint debts, your partner will remain fully liable for the entire balance. Your IVA will cover your share, but creditors may still pursue your partner for the repayment of the joint liability.
Windfalls such as lottery wins, gifts or inheritance must be declared to your IVA Supervisor. These funds are considered assets and may need to be paid into your IVA to repay your creditors. The exact amount will depend on the terms of your arrangement, but in most cases, these funds will be used to pay down your debts.
Your state pension is unaffected by an IVA, but your contributions to a personal or workplace pension may be restricted to the minimum required level during the term of the IVA. If there’s a valid reason to contribute more, your IVA Supervisor may allow a higher contribution.
An Interim Order is a legal measure that can be used to pause creditor action while your IVA Proposal is being prepared. This can be especially helpful if you’re facing legal action or court proceedings related to your debts.
If you hold a bank account with a creditor included in your IVA, that bank may use its ‘Right to offset’ to take funds from your account. In this case, you should switch to a basic bank account with a provider you don’t owe money to.
Once your IVA is approved, included creditors aren’t allowed to pursue you for payments. While you may still receive some automated communications – like statements – legal action and collection efforts must stop.
Before your IVA’s approved, forward any contact from creditors to your Case Officer so they can include all relevant debts. After approval, if creditors continue to contact you, let your IVA provider know.
If you earn extra income such as overtime, commission or bonuses, you must let your IVA provider know within 14 days.
- If the extra income is 10% or less of your normal take-home pay, you can keep it all.
- If it’s more than 10%, a portion will need to be paid into your IVA.
For example, let’s say your monthly take-home pay is £2,000, and you get a £500 bonus.
- 10% of £2,000 is £200, which you can keep.
- The remaining £300 (£500 bonus – £200) is split in half:
- £150 will go towards your IVA.
- You can keep the other £150.
So, in total, you get to keep £350 of the £500 bonus and £150 goes towards your IVA.
An IVA can fail if you breach its terms, such as missing payments, taking new credit or not disclosing assets. If your IVA fails, creditors may reinstate interest, pursue legal action and even consider bankruptcy. However, your IVA provider will aim to work with you to avoid failure.
Council Tax arrears from previous years can be included in your IVA. Current-year arrears may also be included and your IVA payments may be adjusted to reflect the change. Your Case Officer will explain how this applies in your situation.
If you’re due a refund from a PPI (personal protection insurance) claim, the funds must be paid into your IVA. This is because PPI compensation is considered an asset. You may receive a portion of the refund, depending on your IVA terms.
An IVA will stay on your credit file for six years from the approval date. You may find it difficult to obtain new credit during this time, but your focus will likely be on completing the IVA and rebuilding your finances.
Once your final payment is made and all requirements are met, your IVA provider will carry out final checks and issue a Completion Notice. This confirms that your IVA has successfully ended. Your name will be removed from the Insolvency Register three months after completion. Your creditors will also update their records on your credit file.
If you’re made redundant, contact your IVA provider right away. You may be allowed to retain redundancy pay to cover essential costs for a limited period (usually six months). Any funds not needed for living expenses must be paid into the IVA.