• How does an IVA work?
• Which debts can be included in an IVA?
• Can I keep some of my debts out of the IVA?
• How much will I pay each month?
• Is my house safe? Is my car safe?
• What if some of my creditors do not agree?
• Can it be shorter than 5 years?
• How long does it take to set up an IVA?
• What Happens When I Stop Paying My Creditors?
• What if my circumstances change during the IVA and I cannot make the payments?
• What if my IVA fails? - Why would it fail?
• Why would creditors accept writing off some of my debt?
• My bank is a creditor; will I be allowed a bank account?
• What happens after the 5 years of my IVA?
• How much does the IVA cost?
• Is Vincent Bond regulated by a professional body?
• Can I still run a business while in an IVA?
• What will happen to credit file whilst in IVA?
• Will I be able to get a mortgage during the IVA?
• Who knows that I have an IVA – is it made public?

A licensed Insolvency Practitioner negotiates a legally binding agreement between you and your creditors that allows you to pay back what you can afford over a fixed period, usually 5 years.

Normally any unsecured debts can be included within an IVA. These include but are not limited to:

• Credit Cards
• Personal Loans
• Catalogue Debts
• Store Cards
• Overdrafts
• Student Loans
• Outstanding balances after home or vehicle repossession
• Business loans for which the client is personally responsible

Personal debts to the Inland Revenue and VAT can also be included but may be treated preferentially within the proposal. Some debts can be included within an IVA.

So which ones cannot be included?
Although most debts can be discharged in an IVA, certain debts can't. Secured debts such as mortgages and other secured loan repayments including any items on Hire Purchase cannot be included and will be repossessed if repayments can't be made.
Debts such as Rent and Council Tax arrears will normally have to be paid prior to an IVA and provision for the repayment of these debts will be made separately.
Other debts that are normally dischargeable may be denied a discharge, generally because of irresponsible and reckless actions of the debtor.
Debts that are non-dischargeable included:

• Any fine or penalties imposed for an offence
•  Any liabilities arising under an order made in a family or domestic court action such CSA claims for child support
• Any liabilities arising under a confiscation order made under S.1 of the Drug Trafficking Act 1986 0r S.71 of the Criminal Justice Act 1988. 

No. You cannot favour one creditor over another. All your unsecured debts including loans, credit cards, store cards, overdrafts, tax bills and even some old utility bill debts will have to go into the IVA.

If you continue to have credit outside the IVA you risk the IVA failing and potentially bankruptcy. It is important that you are open and honest with the creditors as they are after all writing off a large amount of your debt.  

You will only pay what you can afford each month. We will help you calculate this figure when we go through your income and expenses.

Basically you pay what is called your ‘Disposable Income’ – that is the money you have left after you have paid for all your essential and reasonable living costs.

Creditors do have limits to what they accept on spending, as of course they will get less money if you are spending more on living costs, but we will go through these expenses and help you with your monthly budget plan.

Yes. This is one of the biggest advantages over bankruptcy in that your home will not be repossessed.

However creditors are not likely to accept an IVA where you are spending a very large amount of your income on your mortgage. So in these cases we would look at advising you on remotgaging to reduce your monthly payment – sometimes this is enough to solve the debt problem without an IVA.

You should also be aware that in the final year of your IVA a home owner would be expected to release some equity from there home to go towards the debt. This is only based on what is affordable to you at the time.

What about my car?
Under the terms of an IVA Car Owners will NOT have to give up ownership of their cars as long as they can show that the car is a REASONABLE necessity to their lives.

Property and IVA’s
One of the main benefits of an IVA over Bankruptcy for a Homeowner is the fact that under an IVA the sale of your home CANNOT be forced, whereas, under the terms of a Bankruptcy Homeowners may be forced to sell their property.

Under the terms of an IVA if you own a property and have equity in said property, you will be required to release some of that equity by re-mortgaging your property. This amount will be used to top up your IVA payments or in certain circumstances will be used as the Full and Final repayment of your IVA. Where equity is due to be released from a property the Insolvency Practioner will take into account the extra revenue needed to fund the increased mortgage, as such the Disposable Income of a person will need to be reduced.

The time you release this money from your property will be determined by the insolvency practitioner. It could be at the early stages of your IVA or at the later stages of the IVA. Penalty charges, ability to pay, the Loan to Value you have currently and other factors will have to be taken into consideration.

Releasing money from your property will mean that the IVA will be for a shorter duration of time. i.e. rather than the Standard 60 months, it could be for a period of 48 months, 36 months,12 months or in some cases forming a Full and Final Repayment of your IVA.

If you sold your property during an IVA you will be required to put all your profits from your property into the IVA. There are certain circumstances where some of the profits can be kept, but this would have to be properly justified.

If you have negative equity in your property, you can still be eligible for an IVA. However in this case there is less likelihood of you releasing equity into an IVA during the term. In this scenario, your IVA is more likely to last for 60 months and will be entirely dependant on you having sufficient disposable income to make a reasonable IVA proposal to your Creditors.

Will my car be at risk?
Under the terms of an IVA Car Owners will NOT have to give up ownership of their cars as long as they can show that the car is a REASONABLE necessity to their lives. Examples of this would be someone who needed their car to carry out their job or to get them to and from work everyday. Furthermore the car must NOT be an extravagance, it would not be acceptable to the Creditors if someone was proposing an IVA and driving about in a £30k Aston Martin, unless there was a very good reason for this, i.e. if the person ran a classic car chauffeur service etc…

Once a car has been shown to be a REASONABLE necessity to their lives, all REASONABLE car expenses can then be included in the monthly budget. These include Petrol costs, the price of Insurance, Road Tax and Car maintenance. There are reasonable guidelines to apply to these figures and if someone’s budget showed an unusually high or low figure then this needs to be accounted for.

Some average expenses are listed below

• Petrol - £30-40 / Tank thus Average of £120-£160 / month
• Car Insurance – Average of £400-£500 a year thus Average of £35-£50 / month
• Car Maintenance – Average of £400 a year thus Average of £30-35 / month
• Road Tax – Average £120-£168 a year thus Average of £10-£14 / month

Car HP
If someone has an HP arrangement on their car and has been able to show the car as a REASONABLE expense, the HP can be included within the monthly expenditure budget. However, in the majority of cases if the HP arrangement expires prior to the completion of the IVA then the funds that would have been apportioned to paying the HP would need to be re-apportioned towards the IVA payments. If these funds are not to be re-apportioned then a very good reason for this must be justified and documented.

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To approve your IVA, at least 75 per cent of your debt, of the creditors who vote at a meeting, must accept your proposals. This means that if most of your debt is with one creditor then they will have the most powerful vote. This can make a difference if you have a more awkward creditor, or one who asks for a bigger minimum % to be repaid.
Even if they don’t vote, or they vote against your proposals, each of your creditors will be bound by the agreement as long as it has been accepted by this majority (75%).

Usually an IVA lasts for 5 years as the creditors want to get back as much of their money as they can, naturally. There are cases where you can do what is called a full and final settlement or lump sum IVA which can be settled in just 2 months.

This is where you have a lump sum of money either from a friend or family member or maybe a savings plan that you can cash in – this is offered to the creditors as a full and final settlement for your debts. However, this only works if you have little or no spare money each month to give them after your normal living expenses, as if you did the creditors would rather you did the 5 years plan where you might be able to pay them more money back...  

On average it takes 6-8 weeks from the time we receive all your paperwork. This can take longer, but usually the detailed work we do at the start of the process ensures that the process is smooth.

You would not pay your creditors during this time, so the budget plan we set up for you effectively starts straight away.

Your creditors may still call you during this time, but we will help you deal with this and once the IVA is accepted the calls will stop and the creditors will take no further action.  

Once you have decided that an IVA is the solution best suited to you, you must stop using all of the accounts you hold with the Creditors you have listed on Page 5 of your Statement of Affairs and you should not make further payments to them. This includes any Bank Accounts with Companies which you owe money to.

Whilst the IVA is being prepared and put into place you will still undoubtedly receive letters and you may still receive phone calls from your Creditors chasing payment on the accounts held with them. If this instance arises then you can inform them that you are in the process of proposing an IVA. Most people at this point will be content with that answer but you must be aware that some will not be.

If someone representing a Creditor demands payment and states that their Company will not accept an IVA it is important to remember two things.

• Firstly, this person’s job is to try and get as much money out of you as is possible and if and sometimes they may use intimidating tactics.
• Secondly, this person does not make decisions for the Company on whether IVA proposals are accepted or not and IVA’s are accepted by the various different Companies every day.
• Finally remember that you are taking positive steps to deal with the whole debt, not just the one that is calling you – they are probably unaware of the other debt that you have and that by paying them you may have to borrow more money just to pay for living expenses. You are trying to break this cycle!

It is important to try to remain calm and not become embroiled in an argument. If the harassment continues you can then contact Vincent Bond who will tell you how to deal with the creditors.

Once the IVA is agreed, your creditors are no longer allowed to demand payments from you either by telephone or letter. All of this type of contact from creditors is stopped by law. This means that you are free to concentrate on the other important things in your life such as your family and job.  

It is important for you to be in close contact with your Insolvency Practitioner (IP) if there are any changes, good or bad.

The IP will have an annual review with you to update your details, but it is very important for you to be open and upfront about any changes as they happen.

The IP can renegotiate with your creditors at any time and be aware that if you can afford to pay more then they will expect you to pay more into the IVA – after all they are writing off a large amount of money.  

If once the IVA has been accepted you do not keep up the required payments, then your IVA would fail and you  may be forced into Bankruptcy and therefore subject to all the negative aspects of Bankruptcy.

If you are in an IVA and your financial circumstances change, this does not mean that your IVA will automatically fail. However, it may mean that a proposal to vary the agreement has to be made to your creditors by your IP, which must then be accepted by them.

There are many reasons why an IVA might fail, here are several circumstances.
                              
Job problem?

Scenario 1
You loose your job and it takes a few months to find a new one e.g.  3 months. Once you find the new job, your take home pay is roughly the same as your previous job and you can continue to make your IVA payments.

In this situation, your IP should be able to arrange for you to take a payment holiday from your IVA payments. You stop making your payments for the number of months of your unemployment. You then start making the payments again once getting back into work. The numbers of payments you have missed are added to the end of your agreement.

Scenario 2
You loose your job and it takes a few months find a new one. However, the new job’s take home pay is less than your previous pay and you cannot continue to make your originally agreed IVA payments but could make reduced payments.

Your IP will have to request a variation of your monthly payments to your creditors. If the creditors accept this variation, then you continue to pay your IVA at the agreed reduced rate. If the creditors do not agree the variation, then your IVA will fail and you may face bankruptcy.

Note: If at the time the variation is presented to your creditors there have been no previous problems with your IVA payments (i.e. you have always paid on time and you are up to date) and the change was totally unexpected and due to no fault of your own, then it is likely that your creditors will accept this variation.

Scenario 3
You loose your job and there is no prospect of you securing a new job and / or the income from your new job means that you cannot make any further IVA payments at all.

If you cannot continue to make any contributions to your IVA at all, then it will fail and you may face bankruptcy. However, if you have already made significant contributions into your IVA, and the reason for not being able to work again is due to no fault of your own (perhaps industrial accident or unexpected illness), then it may be possible for your IP to negotiate a full and final settlement with your creditors based on the contributions you have already made.

I become ill and cannot work?

If you fall victim to long term illness during the course of an IVA, there are several possible outcomes, but remember this could happen to anyone not just someone in an IVA!

Scenario 1
You cannot continue in your present job due to sickness or disability (i.e. your present job may involve heavy lifting) but can obtain an alternative job which pays you a similar amount of money as your last.  Your IVA supervisor should be amenable to proposing a variation to your creditors.

Scenario 2
You cannot continue in your present job due to sickness or disability (i.e. your present job may involve heavy lifting) but can obtain an alternative job. However this alternative job pays significantly less than your last job and you can no longer afford to pay the previously agreed IVA contribution. Your IVA supervisor will need to put a proposal to the creditors for a variation in your monthly IVA contribution. If the circumstances that led to this are no fault of your own and beyond your control and you have previously regularly maintained your IVA payments then the creditors are likely to accept your proposal as long as the proposal is still more appealing to them than your bankruptcy.

Scenario 3
Your illness completely prevents work then it is likely that you will be unable to make any significant payments towards your IVA.  If this occurs at the start of the arrangement then it is most likely that the IVA will fail and you may be made bankrupt. However, if the illness occurred towards the end of the IVA, then the creditors may be approached to see if they would agree to complete it early, based on your change in circumstances.  

When IVA’s were first set up in the late 1980’s it was partly for people who could not go bankrupt due to the type of job they had, e.g. lawyer, accountant, police officer, armed forces etc. The IVA meant creditors would not bankrupt these people so they would not lose their job.

The IVA is simply a better deal for creditors. If you were to go bankrupt the creditors would get much less money. In addition the creditors have an independent professional monitoring and managing your payments.

You will probably need to open a new bank account and we can help you with this.

You will need a basic account only that has no overdraft facility. Every bank has a basic account now, so you will be able to get one.

Provided you have met the terms of the agreement and maintained your payments, your creditors will write off the remaining debt and you will be debt free.

You are then in a position to start building up you credit score and can potentially borrow money in future. However we would strongly advise that you did not do so unless you were sure you are able to make to necessary monthly payments. 

All the costs associated with your IVA are taken from the payments you make in to it. So on a monthly basis you will never pay more than you can afford.
Vincent Bond do charge 2 extra payments (so your IVA is 62 months rather than 60 months). These 2 payments are made during the set up period of the IVA and are based on your affordable income.

Your advisor at Vincent Bond will explain this fully to you during our initial conversation.

Our insolvency practitioners are authorised to act by the Insolvency Service (part of the Department of Trade and Industry), and are a member of the Association of Business Recovery Professionals (known as R3). All authorising and professional bodies provide technical, professional and ethical guidelines which have to be followed carefully.
As such the advice given to you by your Vincent Bond advisor has to follow these guidelines for your case to be successful. The insolvency practitioners are monitored regularly to ensure that they follow the appropriate guidelines.
More information is available from the Insolvency Service website at www.insolvency.gov.uk.

Yes you can. Your IVA can run separately from your business.

It is a more complicated process when you are self employed, but as long as you have kept your accounts and tax returns and are able to provide a forecast trading document for the coming year, then you can still do an IVA.

Your Vincent Bond Advisor will help explain this. 

The first point to make is that people who are contemplating an IVA are likely to be in at least some arrears on their payments and thus are likely to have negative information on their Credit File recorded by their existing Creditors. Moreover, somebody involved in an IVA is NOT permitted to have any Credit during this period and thus would not need to be concerned at this time about their Credit Score.

An IVA will show as a negative on your Credit File for a period of 6 years after its completion. However, if the IVA is properly resolved this will show as a positive point on your Credit File.

Credit Scores are often a concern to people but it is important to question someone’s motivation for making the repair of the Credit File their primary issue. Once an IVA has completed the person will be debt free and will also now have the disposable income they were paying towards their IVA available for themselves. People who continually worry about what an IVA will do to their Credit Score should be advised to review the causes of their original Financial Difficulties and review their priorities.

That said, Credit Scores are still an important issue and there is NO reason why Credit shouldn’t feature in someone who has completed an IVAs life.

Here are some helpful hints on how to get a better Credit Score:

You can improve your credit history by increasing the number of positive credit activities you carry out. Try the following to achieve positive entries

(i) Instead of just one credit card with a large limit, use multiple cards with smaller limits. Use them all frequently and REPAY THE BALANCES IN FULL EACH MONTH.

(ii) Shuffle funds around amongst your different credit and deposit accounts to show regular account activity.

Amend mistakes and errors on your Credit File. Many people are refused credit because of simple mistakes. Check your file and have any incorrect information amended.

As soon as you repay or satisfy a CCJ, IVA or Bankruptcy ensure that you forward a copy of the certificate of satisfaction to Equifax and Experian yourself.

Get a mortgage (See Below) People post IVA’s will almost certainly be able to get a mortgage from a Specialist Broker and this itself will improve their credit score.

Most importantly, if you have an IVA, then you should NOT enter into a mortgage without first agreeing this with your IVA supervisor as there could be other ramifications. Your supervisor will advise you of these.

Of course, many people worry about their credit rating post IVA because they are thinking about buying a house. However, this should not be a great concern as the criteria which mortgage lenders use is different to unsecured lenders (i.e. credit cards and personal loans). It will almost certainly be possible to get a mortgage post IVA despite your poor credit history. Specialist mortgage brokers will almost always be able to get mortgages for people post IVA, and furthermore, are likely to get a very good deal which will probably have an interest rate not pay much more than half a percent over the standard mortgage lenders.  

Unlike a bankruptcy your name and address will not be published in the newspaper.
The IVA is a private and discreet procedure. No-one is informed about the agreement other than the creditors themselves and possibly your mortgage provider if they get involved.
The IVA can therefore be used by professionals, forces personnel and the police without damaging career prospects.
It should be pointed out that the IVA will be entered onto the government insolvency register which is a searchable public database