IVA Frequently Asked Questions

How long does an IVA last?

An IVA generally lasts for 5 years. However, there are some exceptions where an increased or reduced term is required. Speak to the IP of your proposed Arrangement to see how long you would be expected to sign up for.

How much unsecured debt would be normal in an IVA?

Usually over £15,000 with more than 3 creditors.

Who would qualify for an IVA?

Any UK citizen apart from Scotland with total unsecured debts of more than £15,000, owed to more than 3 creditors who is struggling to meet monthly repayments. They should have surplus income of at least £150 to meet their IVA payments.

How much would I pay per month in an IVA?

This depends on the level of debt involved and surplus income to cover the payment. You would only be expected to pay what you can reasonably afford after essential outgoings.

However, there will be a minimum amount that is required by creditors which your IP would discuss with you, failing which the IVA is likely to be rejected by creditors.

Is an IVA suitable for the self employed?

Yes. Self employed people can consider an IVA and the same criteria of debt level and income apply.

How long does it take to set up an IVA?

This can vary depending on the complexity of the case. However, in normal circumstances you would expect an IVA proposal to be completed within 4 weeks after you approach the IP. Approximately 3 further weeks should be allowed for creditors to vote on and approve your IVA proposal. Only at this stage should you begin paying monthly contributions to your IP.

Who pays the costs of the IVA?

Administration fees are a part of the Arrangement and are paid from the monthly contributions made to the IP. Creditors approve the level of fees an IP is allowed to charge per case. No up front fees are required and there should be no hidden charges. The proposal is designed to make fees charged totally transparent.

What if I have problems paying the IVA monthly payments?

If your circumstances change and you have trouble paying your monthly contributions you should contact your Supervisor (IP) immediately to discuss a variation in the payment terms. It is important that you don't miss payments into your IVA as it can fail. A substantial variation can be put to your creditors to amend the original monthly payments to allow you to continue with the Arrangement if your circumstances have changed beyond your control. Depending on your circumstances and the status of your Arrangement most creditors will look favourably on a variation request.

A variation reducing your monthly payments is likely to be required if you are made redundant, change jobs for a lower wage or have a reduction in your monthly salary for any other reason. Likewise if you have a change in circumstances increasing your disposable income you should contact your Supervisor (IP) as you may need to increase payments. A large redundancy payment would need to be brought in to the Arrangement or a full and final payment made.

Would an IVA affect my credit rating?

Yes. An IVA will adversely affect your credit rating as you are missing payments to creditors or paying a lower amount than agreed. However, to be in a situation where you are considering an IVA it is likely that your credit rating is already severely affected. Taking action now to bring your debts under control will improve your credit rating in the long run.

Can I do an IVA if I am in the armed forces?

Yes. If you are serving in the armed forces it is important that you take action to solve your debt problems as bankruptcy will mean you may not be able to continue with your career.

Will I need to sell my house if I enter into an IVA?

No. One of the main benefits of an IVA is that it is intended to protect your home. Unlike bankruptcy, an IVA protects your home and you would not be forced to sell it. Part of your Arrangement may include an equity release clause to bring in some of the equity in the final year of the Arrangement. However, there are strict criteria in releasing this equity and only if this is met would you be expected to re-mortgage or make a further 12 monthly payments instead of re-mortgaging.

What happens at the end of my IVA?

At the end of your IVA you will be legally free of any debts included in the Arrangement. Your IP will send you a certificate of completion and your credit file will show you have completed your IVA sucessfully. At this stage you should have a substantial increase in your disposable income and start to live life without the worry of repaying creditors and hopefully live within your means.

Will I be able to keep my bank account?

If your bank account provider is not connected to another debt in the Arrangement and is in credit then you can retain your bank account provided there is no overdraft facility.

If your bank account is overdrawn or connected to another debt in the Arrangement and is brought into the Arrangement, you must open a new basic account with a different bank. Your IP will discuss this with you at the outset. There are banks that will provide basic banking facilities to individuals in an IVA.

What happens if my IVA fails because I cannot keep up payments?

Your IP will do everything necessary to ensure the success of the IVA but in some circumstances IVAs do fail. If the Arrangement fails creditors rights are restored and they may chase you for the whole of the outstanding debt. You may also be made bankrupt.