Understanding which debts can be included in an IVA is important. Many can be added into the Arrangement. However some cannot.
- Debts that are included in an IVA
- Debts that cannot be added to an IVA
- Do you have to include all your unsecured debts?
- What if you owe Friends or Family money?
Debts that are included in an IVA
An IVA deals with unsecured debts. These are things like bank overdrafts, loans, credit cards and catalogues. They can all be included. Payday loans also fall into this category.
If you have used a store card to buy furniture or electrical goods the likelihood is that this debt is unsecured. The goods will not be taken from you if you stop paying. As such they can also be included.
If any of your unsecured creditors have already issued a CCJ (County Court Judgment) against you this debt can also added. An IVA will even overturn an Attachment of Earnings being taken from your wages.
You may also be surprised to learn that money owed to HMRC such as Tax and VAT debt can be included in an IVA. As such it is a particularly useful solution for self employed people.
Debts that cannot be added to an IVA
Secured debts cannot be included in an IVA. The most common form of this type of debt is a mortgage. If you are a home owner you have to continue paying your mortgage and any other debts secured against your property.
An IVA will still help if you are struggling to pay your mortgage. The Arrangement allows you to free up cash which ensures secured debts can always paid on time.
Another common form of secured debt is car finance. Generally speaking these type of agreements are secured against a vehicle. You cannot include this debt unless you are prepared to hand the vehicle back to the finance company.
In addition to secured debts there are other types of debts that cannot go into an IVA. These include money owed to the Student Loans Company and Court issued fines.
Do you have to include all your unsecured debts in an IVA?
If you want to use an IVA you should include all your unsecured debts. You cannot choose to include some and keep paying others.
All your creditors must be given the same fair treatment. If you were to continue paying one the others would see this as unfair. As such they would be unlikely to accept the Arrangement.
It might be possible to leave an unsecured debt out of your IVA in specific circumstances. For example if you are self employed and need to maintain a line of credit to support your business.
Do not keep quiet about one of your debts in the hope you will be able to continue paying it without anyone finding out. You are unlikely to have spare income to maintain the payments. Trying to do so could put your whole IVA at risk of failure.
What if you owe money to Friends & Family?
Money you owe to friends or family is generally unsecured. This debt should therefore be included in your IVA. In some circumstances this can be an advantage.
Family can normally be counted on to vote yes to your Proposal. If they are happy to wait for their money this is ideal. There is nothing to stop you repaying them in full after your IVA is finished.
However if someone has borrowed money on your behalf or acted as your Guarantor they may be relying on you to maintain the payments to them. In these circumstances it may be impossible to include their debt in your IVA.
If family or friends are relying on you to keep paying them an IVA may not be the right solution for you. You should speak to one of our experts before deciding which debt solution to choose.