Individual Voluntary Arrangement questions
Got questions about Individual Voluntary Arrangements? At PayPlan we’re happy to answer all your queries.
You will find below a list of frequently asked questions, and if you think you need practical debt help then feel free to call us on 0800 280 2816 or click the “Get advice now” button so we can call you back.
- Can anyone enter into an IVA?
- Will my IVA be accepted?
- How much does it cost?
- How long will an IVA last?
- Which debts can be included in an IVA?
- What happens if I can’t make the payments into my IVA?
- What happens if my financial situation improves during the IVA?
- What if I receive a windfall during my IVA?
- Will my partner be affected by my IVA?
- Who will find out about my IVA?
- What will happen to my pension?
- Can I arrange an IVA directly with my creditors?
- What happens if I have equity in my property?
- Can the creditors continue to chase me when I am in an IVA?
- What is an Interim Order?
- IVAs and Bank Accounts
- Can anyone enter into an IVA?
An IVA is available to all Individuals, Sole Traders and Partners (“the Debtor“) who are experiencing difficulty in meeting contractual payments to their unsecured creditors. This is providing they have a stable income and a surplus each month after paying for basic living costs. Typically unsecured debts should total in the region of £15,000 and typically be made up of at least three lines of debt to two or more creditors*. You can be sure which debt solution is best for you by contacting PayPlan.
*These criteria are for protocol IVAs. We can put forward standard IVAs with fewer creditors and lines of debt.
- Will my IVA be accepted?
Whether or not an IVA is accepted depends totally on how the creditors vote. An IVA will be accepted provided more than 75% of the creditors by value, vote in favour. If this is achieved, then the IVA is accepted and all unsecured creditors will be bound by the IVA.
An IVA must offer a higher return to creditors than would otherwise be expected were the debtor to go bankrupt.
Your creditors judge each application for an IVA on its own merits when they are considering their voting stance. Deciding factors may be: the value of assets, level of debt, monthly repayment offer, reason for the debt and newness of the debt.
Creditors will expect a high level of commitment from the debtor during the term of an IVA. Socialising, holidays, gifts, beauty treatments, gym membership or any form of savings are classed as luxury expenses and are typically not accepted by creditors as essential areas of expenditure.
Creditors also have their own criteria, which they expect an IVA proposal to meet if they are to vote in favour. The experienced PayPlan staff deal with the main banks and credit card companies on a daily basis and make every effort to tailor a debtor’s IVA proposal to meet the needs of the creditors involved.
- How much does it cost?
As part of the process of setting up an IVA, we will assess your income and expenditure. This will help us ascertain your monthly contributions into the arrangement, ensuring that you can afford them and giving your arrangement the best possible chance of success.
Unlike most companies that provide IVAs, our Insolvency Practitioners do not charge upfront arrangement or assessment fees. Furthermore, you only start paying once your arrangement is agreed so if for any reason creditors reject your proposals or you choose to withdraw your offer, you will not have to pay for the work that we have done for you.
The monthly payments that you make into your arrangement will cover the payments to your creditors as well as the Nominee’s and Supervisor’s fees involved in an IVA. These fees will not affect your monthly payments, as by agreeing to the terms of the IVA your creditors agree to accept a lower return from the arrangement. This means that the payments remain affordable for you.
- How long will an IVA last?
Monthly payments are usually made into an IVA over a period of 60 months (5 years).
You may be in a position to make a Full and Final offer to your creditors. This type of IVA would usually be for a period of 12 months.
An IVA will continue as long as regular payments are maintained. Defaulting on payments could result in the failure of the IVA at which point the debtor could be made bankrupt.
- Which debts can be included in an IVA?
The following debts can be included in an IVA:
- Bank accounts
- Finance company loans
- Credit or store cards
- Outstanding VAT
- Outstanding Inland Revenue debts
- Loans from friends and family
Outstanding Hire Purchase shortfall payments on goods that you no longer have (typically repossessions or write-offs)
You must however keep up full contractual payments to your secured debts and other priority debts (see below), an allowance for which will be made in your expenditure schedule.
Debts that cannot be included in an IVA are:
- Mortgages and loans secured on your property
- Hire Purchase Agreements (except shortfalls)
- Magistrates Court Fines, speeding/parking tickets etc
- Debts incurred through fraudulent activity
- Maintenance/CSA Arrears
- Arrears on a rental property (however you may be able to include outstanding rent on a previous property)
- What happens if I can’t make the payments into my IVA?
It’s important to keep up payments as defaults can result in the failure of the IVA and may lead to bankruptcy.
When considering an IVA, it’s necessary to have a stable income that will last for the duration of the IVA, typically for 60 months (5 years). However, there could be any number of reasons to cause a reduction in income which then affects your ability to keep up payments. Examples include illness, redundancy, relationship breakdown and bereavement.
Therefore, during the term of the IVA, it’s vital that you speak to your supervisor as soon as you think you may have a problem making a payment. There may be options open to you, but communication with your supervisor is absolutely necessary to explore these.
- What happens if my financial situation improves during the IVA?
The Supervisor will undertake an annual income and expenditure review to ensure the monthly payments still reflect your surplus income.
You should keep the Supervisor informed of any changes during your IVA. If there is an increase in your surplus income, your Supervisor may request up to 50% of the additional surplus, to be added to your monthly payments.
- What if I receive a windfall during my IVA?
Your IVA will include a ‘windfall’ clause. Any assets, including lottery wins, bonus payments, gifts or inheritance have to be declared to the Supervisor and paid into the IVA for the benefit of the creditors.
- Will my partner be affected by my IVA?
An IVA (Individual Voluntary Arrangement) is as the name suggests, individual to you. However if any of the debts were taken out in joint names, the other party will also be fully liable for that whole debt.
Your own liability for the joint debt will be taken care of by your IVA; however, the creditor can also pursue the other party for the full outstanding amount whilst your IVA is in place. Once your IVA has completed, the other party will remain liable for any remaining outstanding debt.
- Who will find out about my IVA?
Unlike bankruptcy, IVAs are not published in your local paper. This is often a reason why people favour IVAs over bankruptcy as it is kept more private.
Your IVA will however be noted on the Insolvency Register, held by the Insolvency Service. Any member of the public can access the Insolvency register via the Internet.
Approved IVAs are also published in Stubbs Gazette, a magazine that can be requested by Insolvency Practitioners, finance companies and banks etc.
- What will happen to my pension?
Your state pension won’t be affected by entering into an IVA, however your personal pension payments may be.
Creditors may vote with a modification asking you to suspend payments to a personal pension for the duration of the IVA. You would then be expected to pay this monthly amount into the IVA.
Not all pensions allow a five year suspension of payments, so if such a modification is proposed, your Supervisor will request a copy of your Pension Terms to see if this applies to you.
If you are able to comply to such a modification and there is a very good reason for you to continue contributing into your pension, it may be possible for the Supervisor to negotiate with the creditors on your behalf to find a compromise.
- Can I arrange an IVA directly with my creditors?
No. – To be nominated for an IVA (which are regulated by the Insolvency Act 1986) you will need the services of a licensed Insolvency Practitioner (IP). The IP will also supervise and review your IVA throughout the duration of the Arrangement.
- What happens if I have equity in my property?
If you own your own home, you may be required to remortgage toward the end of the IVA in order to release an agreed level of equity to go towards repaying your debts. If you can’t do this, the IVA may be extended from 60 months to 72 months.
- Can the creditors continue to chase me when I am in an IVA?
No, an IVA is legally binding as long as you keep up payments and co-operate with the Supervisor when asked to do so. Once an IVA has been approved, your creditors have no legal right to pursue you outside of the IVA, so letters and phone calls should stop.
- What is an Interim Order?
An Interim Order prevents your creditors from taking or continuing any legal action against you. If you have any pending court action relating to your unsecured debts, your Insolvency Practitioner may apply for an Interim Order to stop this while the proposals for your IVA are being prepared.
- IVAs and Bank Accounts
Whilst your IVA proposals are being prepared, you may be asked to change bank accounts. This is because the banks have something called the “Right to Off-Set” which entitles them to remove money from your bank account to “off-set” against unsecured borrowings you may have with a ‘linked’ account such as a personal loan and/or credit card.
With a number of the large banks merging over the last 20 years, it can be confusing to know if companies are linked, so we have detailed the main ones and their subsidiaries here (Linked Creditors).
By opening a new basic bank account and using a company with whom you have no financial ties, you can ensure that your income will be safe.
If you already have an independent bank account, with no borrowings or overdraft facility, it should not be necessary to change.
Remember!
An IVA is a debt solution that will directly affect your credit rating negatively for six years from the date your IVA was approved. There will be restrictions on your expenditure and Lenders may reject the arrangement. If the arrangement fails the creditors may force bankruptcy or reinstate interest and charges. If you need to release equity this may extend the arrangement and only unsecured debts will be discharged as part of the arrangement.
More Information on Individual Voluntary Arrangements (IVA)
For immediate and free debt advice please call PayPlan free on 0800 280 2816 or use our Debt Help Form to submit your debt problem online.
