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An IVA is a significant financial commitment. Before applying it is very important that you understand the following facts about the Arrangement.
Fact 1 – Other Debt Solutions might be suitable for you
An IVA is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply you should also consider the other available debt solution options.
An IVA is only available if you are living in England, Wales or Northern Ireland. If you live in Scotland you will need to choose one of the debt solutions available to you locally.
Fact 2 – IVA payments last for 5-6 years
You will need to make payments towards your debts based on your disposable income. These will normally last for 5-6 years unless you settle early with a cash lump sum. After your payments are completed any unpaid debt included in the Arrangement is written off.
Fact 3 – Payment of your Priority Debts
Only unsecured debts which are included in an IVA will be discharged after the arrangement is completed. A secured debt such as your Mortgage is not included and the payment towards these must be maintained. If you do not you will risk the asset that the debt is secured against being repossessed. You must also maintain payments towards your other priority debts such as rent, fines, child support payments and utility bills. If possible you should continue to pay any CCJ debts until your IVA is accepted.
Fact 4 – Your Credit Rating will be negatively affected for 6 years
An IVA will negatively affect your credit rating. A record of the Arrangement will remain on your credit file for 6 years from the date the Arrangement starts. During this time and possibly for some time afterwards your ability to get new credit, a new mortgage or other financial services will be seriously affected.
Fact 5 – Your details will be included in a Public Register
Once you start an IVA your name, date of birth and address will be added to the Insolvency Register. This register is publically accessible and via the internet. As such anyone could discover that you have started the Arrangement if they search for you on the register. Once your IVA is completed and you have your Completion Certificate your name and details will be taken off the register.
Fact 6 – Your living expenses will be restricted
During your IVA you will be required to live within a restricted living expenses budget. You will have to pay all of your surplus income into the Arrangement. If your income increases your payments may also increase for the remainder of the Arrangement.
Fact 7 – Home Equity may have to be released
If you are a home owner you will have to try to release equity from your property in the last year of your IVA. This can be done either by re-mortgaging or taking a secured loan. Where equity is available but you are unable to obtain a re-mortgage or secured loan then your payments will be extended for 12 months.
Fact 8 – Your IVA may not be accepted
The creditors you include in your IVA are not obliged to accept your proposal. It will only be accepted if 75% in value of the creditors who vote on the proposal agree to it. If your IVA is not agreed you will remain liable for the payment of your debts.
Fact 9 – Your IVA could fail if you do not maintain your payments
If you start an IVA but do not keep up your agreed payments then it is likely to fail unless a revised payment schedule can be agreed. If the Arrangement fails you will possibly lose the money you paid into it. Your debts will therefore remain outstanding. It is also possible that your creditors will petition for your Bankruptcy.