How an IVA can help you avoid legal action
If your creditors have taken legal action against you for the money you owe them, an IVA may still be a debt solution that could help. Below you will find real life examples of how we’ve helped our clients avoid legal action with an IVA.
When dealing with bailiffs
We helped a care worker who owed approximately £10,000 on unsecured loans, credit cards and ‘payday loans’.
She was not sure how to deal with her creditors if she couldn’t afford the full payments and instead of seeking debt advice, she made no payments at all. This resulted in a creditor obtaining a County Court Judgment and then instructing bailiffs to visit her property.
She was worried that bailiffs would gain access to her property and remove her possessions. After her living costs were taken into account, she could afford to make a monthly payment of £100 to her debts.
Creditors agreed to an IVA where she paid £100 a month for five years. Bailiffs were not allowed to visit the client’s property, as an IVA stops the creditors from continuing legal action. The creditor who had instructed bailiffs received the payment from the IVA in full and final settlement of their debt.
Creditors agreed to write off £4,000 of her debt and reduced her monthly debt payments by more than £300.
If a bankruptcy petition is outstanding
We helped the partners in a Partnership who ran a hairdressing salon. They contacted us only two weeks before their bankruptcy hearing, owing over £100,000.
The business had suffered due to ill-health and they were using credit to pay for living expenses. We arranged for the bankruptcy hearing to be postponed and put forward an IVA proposal.
We demonstrated to the creditors that the IVA would provide a better return, as the current economic climate may result in the business not realising its full value in sale. The partners paid £400 a month each to their IVAs which lasted five years.
The creditors approved the IVA and the bankruptcy petition was dismissed. The clients’ income improved and their home and salon weren’t sold – which almost certainly would have been the case with bankruptcy. Creditors agreed to write off more than £75,000 of their unsecured debt and reduced their monthly debt payments by more than £3,000.
These clients have since made every payment to their IVA.
If a County Court Judgement (CCJ) is outstanding
We helped a child minder who owed approximately £20,000 on credit cards and ‘payday’ loans.
Due to not seeking debt advice earlier, she was unaware how to deal with her creditors when she could not afford the full payment. One of her creditors had obtained a County Court Judgment against her and was threatening either bailiffs, deducting money from her earnings or making their debt secured on her home. After her living costs were taken into account, she could afford to make a monthly payment of £120 to her debts.
An IVA was set up, which stopped legal action continuing. Creditors could not take any more legal action and the County Court Judgment was included in the IVA. The client paid £120 a month into the IVA for 5 years, and avoided bankruptcy which would have put her home at risk. The creditor who had the County Court Judgment received a payment from the IVA in full and final settlement of their debt.
Creditors agreed to write off over £12,000 of her unsecured debt and reduced her monthly debt payments by more than £400.
If an Attachment of Earnings Order is in place
We helped a soldier who owed around £30,000 mainly on credit cards and unsecured loans. However, he also owed money on a Hire Purchase agreement for a car that had been repossessed. The Hire Purchase company had obtained an Attachment of Earnings Order against the client, and was receiving payments of £100 a month direct from the client’s wages. This meant he could only afford £50 a month to his debts.
An IVA was set up, which stopped legal action continuing. The Attachment of Earnings was removed, which resulted in the client now affording £150 a month into the IVA for 5 years. He also avoided bankruptcy which may have affected his job. The creditor with the Attachment of Earnings received a payment from the IVA in full and final settlement of their debt.
Creditors agreed to write off over £20,000 of his debt and reduced his monthly debt payments by more than £600.
We helped a self-employed builder who had been issued with a bankruptcy petition by the tax authorities. The builder owned his own home and really wanted to avoid bankruptcy as he employed 6 people. In bankruptcy, his employees would be made redundant.
We contacted the tax authorities to ask them to put the bankruptcy hearing on hold until the IVA was approved by creditors. Once the IVA was approved, the bankruptcy hearing would be dismissed. However, the tax authorities refused to put the bankruptcy hearing on hold.
We applied to the court for an Interim Order, which prevents any legal action commencing or continuing without the permission of the court. This prevented the client from being made bankrupt which gave time for the IVA to be put forward.
The IVA was set up and agreed by the creditors, the bankruptcy petition was dismissed and the debt to the tax authorities was included in the IVA. This saved 6 jobs as the client was able to retain his staff and also keep his home. Creditors agreed to write off £80,000 of his unsecured debt and reduced his monthly debt payments by more than £3,000.
Possible annulment of bankruptcy
We helped a nurse who owed £8,000 on credit cards and also had Council Tax and utility arrears. She informed us that she had been made bankrupt by one of her creditors. She lived alone in a solely-owned mortgaged property with £80,000 equity, and naturally she was extremely anxious to protect this property. In bankruptcy, this property would be sold to pay her debts. After her living costs were taken into account, she could afford to make a monthly payment of £400 to her unsecured debts.
We set up an IVA, where she would make a monthly payment of £400 a month until her debt and our administration costs have been paid in full. Her IVA was accepted by her creditors, and we could then take steps to annul the bankruptcy. This means she would no longer be bankrupt and lose her property.
Her IVA was successfully completed after three years, creditors received payment in full and she could stay in her property.
Extinguishing joint liability
We helped a civil servant who owed £40,000 mainly on loans. He lived with his wife and two children. His wife did not have any debt in her sole name, but had one joint loan for £15,000. After their living costs were taken into account, they could afford to make a monthly payment of £240 towards their debts.
We discussed all the debt solutions with them, and they decided to set up an IVA. However, as the wife only owed one debt, instead of setting up an IVA for the husband and an IVA for his wife, we wrote a clause in his IVA that his wife was no longer responsible for the joint debt if her husband’s IVA was successfully completed. The loan company agreed to accept this clause, and the IVA was successfully completed in five years.
Creditors agreed to write off over £25,000 of their unsecured debt and reduced their monthly debt payments by more than £800.
How a moratorium period can help
We helped an author who owed over £100,000 on several different loans, credit cards and store cards. She had few living costs as she lived rent-free with her parents who also paid for her food. Her income was very sporadic as it was reliant on obtaining publishing deals for her books. The amount and timing of these royalties was uncertain, so she could not commit to a regular monthly payment.
We set up and completed an IVA over five years, where she would make a payment into the IVA of her royalties as and when she received them. She received no royalties until year 3 of her IVA, however by setting up an IVA, creditors had frozen interest and charges on her debts and were prevented from taking legal action which allowed her to concentrate on writing.
By the time her IVA was completed, she had contributed £15,000 into her IVA which meant creditors agreed to write off £85,000 of her debt.
*In the case of a one-off lump sum settlement