Insolvency is the term given to a person or company that cannot repay its debts on time, as agreed by its creditors. There are several types of Insolvency solutions available for dealing with debts.

Any business or individual struggling with repaying their debts may be eligible for an IVA. However, there are specific criteria (see below) where an IVA is better recommended for you and your creditors over other Insolvency solutions, such as Bankruptcy.

The criteria where an IVA may be favoured over other Insolvency solutions are as follows:

• You have debts that you cannot afford to repay.
• You are struggling to manage your monthly debt repayments.
• You owe money to more than two creditors (in some cases, just one creditor)
• You have some income left over each month (after living expenses but before any debt repayments)

It is not possible to do an IVA on your own. An IVA is a legal debt solution, and you will need the assistance of a professional called an Insolvency Practitioner (IP) to apply for one. The IP will also supervise and monitor your IVA for its duration. An Insolvency Practitioner is a person qualified and licensed to act on behalf of someone who is Insolvent. Most IPs are accountants or insolvency specialists.

There is no clear answer for this. It depends on your financial situation, and your choice of which you feel is right for you. IVAs and Bankruptcy are two entirely different Insolvency procedures that can deal with your debts. They also have some similarities. Knowing which is better for you is dependent on your circumstances. Certain factors of each Insolvency solution will affect you differently. For example:

• An IVA could protect your home and vehicle, whereas, in bankruptcy, you may have to sell those assets.
• You might be in a very professional job, where Bankruptcy is not allowed as an option.
• You might have no assets where Bankruptcy could be the better option.
• You might want to make some monthly repayment towards your debts, or you might want to address everything quickly and be free of your debts in the quickest way possible.
• You might be worried about Bankruptcy fees.
• You might not want your insolvency listed in the local newspaper under Bankruptcy.

There are also certain factors in both solutions that are similar. For example,

• They are both formal Insolvency solutions.
• Your credit rating will be affected in both an IVA and Bankruptcy.
• Some types of employment can be affected by both debt solutions.
• Both debt solutions are listed on the Insolvency register.

Debts that can be included in an IVA are:

• Loans
• Overdrafts
• Credit cards
• Store cards
• Charge cards
• Catalogue debt
• Payday loans
• Council tax arrears
• Tax debts
• Some Utility debts
• Shortfall debts

A standard IVA usually lasts for five years (60 monthly payments), although it can be completed in as little as 12 months if you propose a lump sum payment to settle your debts.

If you are a homeowner with equity, this will be reviewed in the final year of your IVA. You may be required to introduce some of your share of the equity into the agreement. If this is not possible, your IVA could be extended for up to another year. This will all be explained in detail before applying for an IVA.

Pros

The benefits of an IVA can be pretty compelling, especially if you have problems with debt:

• You only must pay an agreed percentage of your debt back. You will still be paying part of your debt back with an IVA, which must be higher than the creditors are likely to receive in Bankruptcy.
• You will be free of debt in a set time. In an agreed number of years, you will be debt free and able to get on with your life.
• Your creditors will stop calling. Once enough of your creditors agree to it, at least 75% in value of the creditors that vote must do so. An IVA is legally binding. They cannot take further legal action or contact you to demand payment.
• You won’t have to sell your home. However, you could be expected to re-mortgage and free up some equity for your unsecured creditors. Our adviser can explain this in more detail.
• It’s affordable. Your monthly IVA repayments will depend on your specific income and outgoings, meaning it will be an amount you can afford each month.
• The contractual interest and charges on your unsecured debt will be frozen, so you can get on with making payments.
• There is always someone on your side. You will receive support from the insolvency practice, meaning you always have someone to discuss any concerns with.

Cons

You must consider everything, including the small print.

• A high proportion of IVAs proposed are accepted; however, your creditors do have to agree to an IVA. Therefore, we can’t guarantee it.
• An IVA is a formal arrangement, so you do need to comply with the terms for it to work. The monthly payments will be affordable and sustainable but will mean quite a tight budget while the debt is repaid.
• It will affect your credit score. IVAs remain on your credit file for six years from the date your creditor agrees to it or until your IVA is finished; if it lasts longer than six years, meaning that even if you complete it within five years, it will show up on your record for another 12 months.
• Your IVA will be listed on the Individual Insolvency Service register.
• You will pay fees to the IVA company, although they will often be factored into your affordable monthly payments.

No two IVAs are the same. Your monthly IVA payment is unique to your circumstances. It is calculated by analysing your living situation, income, expenses, priority debts, and unsecured debts. After all expenses and priority debts (but not including other debt repayments) are paid, the money left over each month will be your IVA payment.

Most creditors are fully aware of an IVA and what it is, as it has existed for over twenty years. If 75% of your creditors by debt value vote in favour of your IVA, then all creditors are bound by its terms. Creditors can suggest alterations to your proposal, and you can choose whether to accept them or not. If your creditors vote against your proposal, you still have the option of an informal arrangement or other solutions. Creditors favour IVAs over other Insolvency solutions as it shows you are willing to try and pay back what you can and gives them a return on their outstanding money.

An IVA must be approved by more than 75% (by debt value) of your creditors at a meeting of creditors. On some occasions, creditors may reject a proposed IVA. The most common cause is that they are unhappy with the proposed arrangement, which is not at a level that meets individual creditor guidelines. If your IVA proposal is rejected at the Meeting of Creditors, it may be possible for your IP to make amendments and re-propose the IVA if you can offer a revised IVA payment. If this is not the case, you will have other options for managing your finances. We can discuss this with you further.

Yes. An IVA affects your credit rating. It will be noted on your credit file that you are in an IVA, and your credit rating will be affected for up to 6 years. However, if you struggle to repay your debts before seeking help and have missed payments, your credit rating is already affected and will continue to deteriorate. The consequences of not addressing your debt problem could be just as harmful to your credit rating. Any debt solution you enter will affect your credit rating because you are no longer paying your agreed contractual repayments with your creditor. After six years of your credit rating being affected, your credit rating will start to repair.

All your current credit agreements will be stopped when you are in an IVA. You cannot obtain any new credit until your IVA is complete.

In some cases, you may be required to change bank accounts, while your IVA is being prepared. This is because if the bank involved is also a creditor involved in your IVA, they may attempt to remove money from your account for any debt outstanding. A new bank account with a creditor that you have no debts outstanding with, will prevent any issues like this. We can let you know if any of your creditors are linked to your current bank account.

An IVA will not affect your job, but there are some professions where doing an IVA will mean you can no longer practise in that profession, or you will be able to practise but with certain restrictions. i.e., if you are in a finance, law, or accountancy role. If you are worried about how an IVA might affect your job, you could check the conditions of your contract to make sure.

We offer a complete guarantee of confidentiality and privacy concerning your financial affairs. We will never disclose information about you to any outside organisation or say who we are when we call you. This means you can feel safe providing your contact information without worrying that others will find out that you are seeking our help.

Insolvency Register is a public register available online. It contains searchable information on any Insolvency solution, such as Bankruptcy, IVA and Debt Relief Orders. Anyone in one of these solutions will have their details on this register. When your Insolvency solution is complete, your details will be removed from the register (this can take a few months).

You must keep up repayments on your IVA as failure to do so could fail your IVA and may lead to Bankruptcy. An IVA lasts for a significant length of time, so it is typical for the odd problem to arise throughout its term, causing you to miss a payment.

If you are worried you will miss a payment; you need to contact your supervisor immediately. There may be options open to you, such as a payment break if your missed payment is deemed as an emergency, or you might need your IVA payments temporarily altered. Any missed payments will need to be accounted for and added at the end of your IVA. If you have had a notable change in circumstances during your IVA, your IP may need to negotiate amendments to your IVA with your creditors. If your creditors do not agree to the amended terms, your IVA could fail, leading to Bankruptcy.

Suppose there is a valid reason for arranging a payment break with your supervisor or IP; this will cause your IVA to be extended as the missed payments will need to be added at the end of your IVA.

You can cancel an IVA, but it is not advised unless the reasons for doing so are acceptable. Cancelling an IVA can result in profound consequences. It needs a lot of thought, and you should discuss it and your reasons why you want to cancel with your IP or supervisor. After consulting with your IP, you must state this to your IP in writing if you wish to cancel. Your IP will fail the IVA and send you a notice of termination. You will still need to address your outstanding debts and be responsible for IP fees. If you do not promptly sort out your debts with your creditors after termination, you could be bankrupt.

Upon completion of your IVA, you will receive your completion certificate. Any remaining debts are written off as agreed, and you can start over free of debt. Your creditors will update your credit file. Keep an eye on your credit report in the following months to ensure your creditors have updated everything. Your credit rating will begin to repair six years after the commencement of your IVA.

Yes, it does. Of course, if you have financial difficulties such as defaulting on repayments of your loans, your credit rating may be already affected even before you enter an IVA. If you have an average credit rating when your IVA commences, then the event of your IVA will trigger negative credit ratings on all your debts in the IVA. This negative credit rating will continue for six years from the commencement of your IVA, and only after that time has elapsed will your credit rating return to normal. You may have to be proactive in removing the defaults from your credit files after the six years have elapsed.

IVA can be set up within a few weeks of contacting the firm providing insolvency services – anything from three to six weeks. It does depend on the complexity of your financial circumstances. However, suppose the debtor provides the documents and information promptly when requested. In that case, it is not unusual for the Meeting of Creditors to be scheduled in the same month as when that initial contact occurred. It is remarkable how the lapse times for preparations of IVAs have shrunken in the last few years.