Questions about IVA's and personal debt

Below is a list of questions that we are frequently asked. There are 3 sections: before, during and after an IVA.

Why should I use Debt Free Devon to handle my insolvency ?

Because Debt Free Devon have over 20 years of experience in helping local people with personal debt problems and provide a swift, friendly service that cannot be matched. Read our testimonials page to hear from some of our clients who have benefited from our services.

Before an IVA

What is an IVA and how does it work ?
Is an IVA right for me ?
My IVA - what do I do first?
Why have I not heard of IVA’s?
What sorts of people enter into IVA's?
Can I open a bank account with IVA pending?
How does an IVA effect my home?
How Much Will I Have to Pay Into My Arrangement?
What happens if my IVA is rejected?
What if my creditors aren’t all in favour?
Will an IVA affect my partner when we marry?
Is Child Benefit affected by IVA Payments?
How much does it cost ?
Why should creditors accept an IVA ?

During an IVA

What happens if I miss a payment during my IVA ?
What happens if I become ill during my IVA ?
What happens if another creditor appears ?
Can I work part time in an IVA ?
What happens to my IVA if my circumstances change ?
Can I pay off my IVA early ?
Can a friend or family member introduce monies to pay off the creditors on my behalf ?
Can I cancel an IVA ?
What happens if I inherit money during the term of my IVA ?
What happens at the end of the agreement ?

After an IVA

Will My Credit Rating Be Affected?
Can I open a bank account ?
Can I get a mortgage ?

Answers to your questions

What is an IVA and how does it work ?
An Individual Voluntary Arrangement is a formal agreement between you and your creditors to resolve your debt situation. This can be done in one of two ways - either by a one-off payment that clears your debt or making a single reduced payment each month which lasts for a sensible period of time (often 5 years). Once this agreement is made, creditors are not allowed to add any further interest or charges to your accounts by law. The agreement is fixed - meaning that creditors can not make changes to it. The arrangement is governed by the Insolvency Act of 1986. It is important to understand that an IVA is not a form of bankruptcy. An IVA is specifically designed to avoid the many pitfalls and stigma surrounding bankruptcy.

Is an IVA right for me ?
If you are struggling to pay your debts, then you are able to apply for a Voluntary Arrangement. Firstly, this involves gathering information about your financial circumstances. We then assess this information to see if you meet the required criteria. If you do meet the entrance criteria, then we will make an application on your behalf. We then prepare a proposal for you. Once completed, we enter into a negotiation with your creditors to get the proposal accepted.

My IVA - what do I do first?
If you would like to find out more about Individual Voluntary Arrangements and the benefits that an IVA handled by Debt-Free-Devon can bring you, then contact us by clicking here

Why have I not heard of IVA’s?
You may not have heard of individual voluntary arrangements until recently. IVA's were a relatively uncommon practice until recently, when far more people have ended up with money problems due to changes in spending patterns and lending practices.

What sorts of people enter into IVA's?
People from all walks of life can end up in money difficulties. We see a wide variety of people ranging from low income earners to highly paid professionals who come to us for advice. Entering into an IVA is not considered to have the same negative stigma as bankruptcies carried years ago. In fact, they are being arranged for people almost every day, and it is anticipated that there will be over 100,000 people making arrangements in 2007 alone.

Can I open a bank account with IVA pending ?
Yes, you can open a Bank Account with an IVA pending and this is sometimes advised as a necessary step. Please remember that you must be completely honest with the bank when opening the account and obviously if they question you whether you are proposing an IVA, you must tell them the truth.

How does an IVA effect my home ?
Unlike bankruptcy, assurances can be agreed to protect the family home, but this will depend on your particular circumstances.

How Much Will I Have to Pay Into My Arrangement ?
We will advise you fully about the amount that you should propose to pay into your IVA. In principle, however, the payment will be based on the amount you have left over after we’ve made an allowance for all the day to day living expenses of you and your family. Your creditors will usually require that these payments are maintained for five years.

What happens if my IVA is refused
If an IVA is rejected you revert to the same position as you were in before the proposal. There is no obligation placed upon you or the person assisting you with the Proposal to petition for your Bankruptcy. Of the many IVA's that we have dealt with, we have found refusals to be very rare.

What if my creditors aren’t all in favour ?
One of the main advantages of an Individual Voluntary Arrangement is that you do not need agreement from all creditors to obtain approval of the Proposal.

To approve a Voluntary Arrangement a Meeting of Creditors must be called and 75% of creditors attending the meeting in person or by proxy must agree to the Proposal to approve the Arrangement (please note this is not 75% of total creditors). This means that if only one creditor attends the meeting either in person or by proxy, irrespective of the amount owing to that creditor, the Arrangement can be approved irrespective of other larger creditors choosing not to vote.

Will my IVA affect my partner when we are married?
No. Credit ratings are now solely against an individual. Therefore the IVA should in no way affect any other person.

Is Child Benefit affected by IVA payments?
The Insolvency Act states that all people are entitled to a reasonable standard of living. The Proposal in no way affects the amount of Child Benefit or Income Support you receive. However this income must be taken into account when considering whether you are in a position to make a monthly payment to your creditors.

How much does it cost?
We appreciate that because of your financial position you may be unable to pay our set up and administrative fee immediately. In some circumstances our fee will be drawn from your monthly payments and before your creditor’s payment. Therefore, in reality you are required to make NO additional payment whatsoever other than that which you can afford to pay to creditors.

Why should creditors accept an IVA?
When submitting your proposal to creditors, one of the documents attached is a financial comparison detailing the outcome of the Arrangement and that of Bankruptcy. Generally creditors will not accept a Voluntary Arrangement unless the financial outcome for creditors is better than Bankruptcy. Because of the nature of Bankruptcy it is rare for an IVA to produce a worse outcome for creditors. Therefore once they are in receipt of the Proposal they are aware that commercially it is the best decision for them to make in that they are not able to get any further monies in any other way.

What happens at the end of the agreement?
As long as the terms of the proposals have been fully carried out, your creditors will have no further claim against you and the balance of any unpaid debts is written off.

What happens if I miss a payment during my IVA ?
An Individual Voluntary Arrangement is a contractual agreement between yourself and your creditors. An IVA will provide clauses which detail the procedure that must be followed if payments are missed.
All Proposals drafted by Debt Free Devon contain a clause stating that if three consecutive payments are missed this will be deemed to be a default of the Arrangement.

We are aware that circumstances are not likely to stay the same for a prolonged period of time and therefore the odd missed payment is likely. With the clauses stated above the odd missed payment does not cause a default of the Arrangement and you are able to make up the monies in the subsequent months.

What happens if I become ill during my IVA ?
The Individual Voluntary Arrangement is simply a contract between yourself and your creditors. If you become ill and are unable to work for a prolonged period of time this may mean you miss more than the structured number of payments allowed under the Voluntary Arrangement. Each Voluntary Arrangement drafted by Debt Free Devon will enable you to renegotiate the position with your creditors, so as to ensure the Voluntary Arrangement is not simply in default as soon as you miss a payment.

What happens if another creditor appears ?
In accordance with Insolvency legislation as defined in the Insolvency Act 2000, all liabilities as may be due as at the date of the Voluntary Arrangement Proposal are caught by the Voluntary Arrangement. This basically means that whilst you had not notified all creditors that you had proposed a Voluntary Arrangement, any creditors you had not notified are still bound by the Arrangement. It is important to remember that this is only the case if it is an honest mistake. Obviously if it is a creditor that is intentionally excluded this could bring about default of the Arrangement.

Can I work part-time in an IVA ?
A Voluntary Arrangement can be drafted in many different ways. There is no stipulation as to how your employment should be carried out and therefore there is no reason why you cannot work part-time during the course of a Voluntary Arrangement.

What happens to my IVA if my circumstances change?
This is very similar to what happens if you become ill. You do have the option to go back to your creditors and renegotiate the contract if necessary. We are aware that a person’s circumstances can change in very many ways during the course of a Voluntary Arrangement and therefore the ability to do this is essential.

Can I pay off my IVA early?
This is very much dependant on the basis of the Voluntary Arrangement that you have agreed. If a third party was willing to make all payments on your behalf then there is no reason why the Voluntary Arrangement could not be finished early.

Can a family member or friend introduce monies to pay off the creditors on my behalf ?

A great many Voluntary Arrangements are based on what is known as third party contributions. This is basically where a friend or family member will offer a sum of money in full and final settlement of all of your creditors. Typically this could be anywhere from between 10% to 50% of the amount owed. This is a very effective way of dealing with debt over a relatively short period. IVA’s based on 3rd party contributions typically would last no longer than 6 months.

Can I cancel my IVA?

No. If you decide that you can no longer proceed with your Voluntary Arrangement you will be in default. The Supervisor governing the terms of the Proposal will have no option other than to write to your creditors to seek their views, which may be to petition for your Bankruptcy.

What happens if I inherit money during the term of my Voluntary Arrangement?

A windfall clause is generally included in your Arrangement Proposal. The basis of this clause would mean that any monies that you inherit during the term of your Arrangement will be utilised for the benefit of Arrangement creditors.

What happens at the end of my Arrangement?

As long as you have complied with your Proposal as agreed, your creditors will have no further claim against you and the balance of any unpaid debt is written off

If you require help to understand any of the terms above, please refer to this debt glossary care of the insolvency service.

Will My Credit Rating Be Affected?
This will vary widely from case to case, depending on the circumstances surrounding your IVA. Credit ratings do improve and can often be repaired over time.

Can I open a bank account ?
Yes, you can open a bank account, however banks may be selective as to which type of account they offer you.

Can I get a mortgage ?
Yes, you will be able to apply for a mortgage like anyone else, and your application will be treated based on your circumstance. There are sometimes slight penalties such as higher interest rates or deposits required.