We recommend that you get some professional, impartial advice before taking on an IVA, as there are several restrictions and obligations that you need to consider.
Eligibility
Not everyone will qualify for an IVA.
IVAs are generally suitable for people with a sustainable regular source of income. People with a lump sum to pay towards their debts may also qualify for an IVA.
Only your unsecured debts can be included. Examples of unsecured debts include credit cards, personal loans and overdrafts. Secured debts (like mortgages or secured loans) and some other debts (including student loans, fines and child support) will still have to be paid separately outside of the IVA.
Restrictions
An IVA should be carefully considered because of the possible consequences for your personal, professional and financial life. These include the following:
- Your credit rating will be affected for six years, starting from the date the arrangement is agreed.
- You will have to keep to a budget for the full term of your IVA: usually 5 or 6 years.
- An IVA may affect the terms of your employment; you should check your contract or speak to your HR department.
- An IVA can also affect any hire purchase agreements you might have.
- Over the term of the IVA you must declare any inheritance, bonuses or windfalls. It is likely you will have to pay these into your IVA.
- Your IVA will be recorded on the Insolvency Register. The register is maintained by the Insolvency Service and is available for viewing by the general public. It contains all details of current IVAs.
Your home
Under an IVA it is unlikely that you will have to sell your home. However, depending on the amount of equity in your home, you may have to remortgage your property six months before the end of your IVA.
The level of remortgage is restricted and should not usually take your secured borrowing above 85% of the value of your home. Any money released from this will be used to pay into the IVA.
Your Insolvency Practitioner will discuss this with you in more detail and will include anything related to the remortgage when they help you to draw up the IVA proposal to be sent to your creditors.
The role of the insolvency practitioner
The IP becomes the supervisor of the IVA after it has been approved. Their role is to act even-handedly between you (the debtor) and your creditors to ensure that the terms of the IVA
are fulfilled.
Default
If you do not keep to the terms of your IVA - for example, because you miss your monthly payments - you may ask your creditors to vary the terms of your IVA. If this is not possible your IVA may be terminated.
If your IVA is terminated, the supervisor may petition for your bankruptcy but rarely does so.
If your IVA is terminated, any costs of your IVA will be included within your total debt.
IVA help and advice
We can provide information on all aspects of IVAs, CCCS Debt Remedy, our online counselling service assesses your situation and provide the best debt advice according to your individual circumstances.