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Problem Debt – How an Individual Voluntary Arrangement Could Help You

Published on:March 2, 2017Author:Lucyna Rynkiewicz-Jones

An Individual Voluntary Arrangement “IVA” is a detailed and legally binding payment proposal to repay your debt. Generally IVA’s are based on affordable monthly payments for a 5 or 6 year period. After this period any remaining debt included in the IVA will be “written off” by the creditors once all payments have been made.

If you have a property it is expected that your proposal will include the refinancing of your property in the final year of the IVA. If this is not possible, it is usually permitted that you pay 12 extra contributions instead or introduce a 3rd party sum.

Examples of unsecured creditors whose debt can be included in an IVA are:-

  • Credit cards and loans
  • Debts owed by you and someone else “jointly owed”
  • Monies owed to individuals including friends and family
  • Debts due to HMR & C including overpaid benefits, self assessment tax, VAT
  • Arrears of council tax and utilities
  • Trade creditors who supply you if you trade as self employed
  • Shortfall once a property has been repossessed

The debts that cannot be included in an IVA include:-

  • Matrimonial debt – monies owed to an ex-husband or wife which a court has decided should be paid
  • Student debt
  • Court fines or fines for traffic violations

IVA Criteria

  • Unsecured debts of more £7,000 or more.
  • Surplus money each month after you have paid your personal and household bills is £100 or above.

What does it cost?

Once your arrangement is approved you will only pay the monthly contributions agreed by your creditors. There will be a Nominee’s fee and a Supervisory fee both of which are taken from your monthly payment and are therefore a cost borne by the creditors. The fees can vary from case to case but will be discussed in detail with you prior to any plan being put in place.

 How do I apply?

If you would like more information on an IVA, you can contact us and our dedicated team will discuss this option with you in more detail as well as any other options that could be available to you.

The Benefits

  • You make affordable monthly payments usually for 5 or 6 years. (If you have a lump sum it is possible to offer a full and final IVA)
  • Unsecured debts remaining after an IVA is successfully completed are written off.
  • An IVA can protect your residential property.
  • An IVA prevents creditors from taking action or continuing to add further interest or charges to their debt.
  • Protocol Compliant IVA’s give your Supervisor the power to allow payment breaks and extend the arrangement if there are missed payments.

The Risks

  • If you are a homeowner you will be expected to try and refinance your residential property in year 5 and if this is not possible, you can introduce a lump sum or pay 12 extra contributions instead.
  • Certain assets may not be protected such as windfalls, investment properties and savings
  • The IVA can fail if you do not keep to the terms. Creditors will then pursue you for the balance and any interest that had previously been frozen by the IVA.
  • An IVA means you have to live within an agreed budget for the period of the IVA and you cannot take on new credit without your Supervisor’s consent.
  • Your credit rating will be affected for 6 years and details of your arrangement are added to the insolvency register.

If you find you need some help with budgeting or are worrying about problem debt, get in touch. Problem debt is debt where the monthly repayments are eating into the money you need to live on. There a range of solutions to help you deal with such debt and could include an IVA which can allow you to *write off debt which you cannot repay.

The Debt Advisor can help you set up an IVA. We will review your circumstances and offer advice on all options that might suit your needs. We will also explain how the fees are paid out of your contributions.

All debt solutions need to be carefully considered. IVA’s are formal solutions and failure to keep to the terms can result in your IVA failing and you could end up bankrupt.

There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.

The Debt Advisor is Authorised and regulated by The Financial Conduct Authority (reg no: 606669).

*You would only write off debts covered by your IVA if the arrangement is successfully completed.