If you’ve decided that an Individual Voluntary Arrangement (IVA) is the right route out of debt for you, it’s time to prepare to meet your Insolvency Practitioner.
Debt can feel like a hole you just can’t climb out of. But sometimes, preparing your case for an IVA can feel almost as daunting. So in this guide, we’ll take you step-by-step through the process of applying for an IVA.
The effect of escaping debt
Debt has many effects and comes with many emotions. Studies show the effect of debt on mental health. Others highlight feelings of regret, guilt and anxiety.
But if debt comes with lots of associated negative effects, taking steps to escape it has many positive effects. As the Daily Record reported last year, seeking debt advice won’t just help your finances; it will improve your health and wellbeing.
An IVA will not be the right route out of debt for everyone. Read our guide to IVAs here to find out if it’s a viable option for you. For many, however, an IVA offers the chance to escape debt for good. As government figures show, 20,000 people chose an IVA in the last quarter alone. Here’s where to start with your application.
Can I apply for an IVA on my own?
No. To apply for an IVA you’ll need to go through an insolvency practitioner (IP). These are debt professionals who hold a licence which they will have gained by passing insolvency examinations, building experience in insolvency work and satisfying the regulator that they are competent to be an IP.
There is no alternative to using an IP if you want an IVA.
Will any IP do?
All IPs must have satisfied the regulator that they are competent to do the job, so from a technical perspective any practitioner will do, but fees do vary. Whilst that won’t usually matter a great deal (because the amount you pay towards your IVA is dependent on the amount you can afford, not the cost of your IP), it could have an affect if your IVA fails as the cost of your IP will be added to your outstanding debt.
Also, you’ll be working with your IP for at least the next five years, so it pays to shop around and choose a provider who a) doesn’t cost the earth and b) is someone you feel comfortable dealing with.
If you need an IVA in Scotland, we can help.
Does the IP work for me?
It’s not really a question of ‘whose side are they on’. Technically the job of an insolvency practitioner is to recover money on behalf of creditors. In practice, however, the best way to do that is to find a solution that works for everyone. If they put an IVA in place that you can’t afford, no one benefits, so they really will work to ensure that your IVA works for you.
How do I prepare to meet my IP?
Your insolvency practitioner will want to make the whole process as painless as possible, but you can make that process even easier by doing two things:
Put a budget together
An accurate budget will enable the IP to work out whether an IVA is right for you and establish how much money you have left over after your essential outgoings have been deducted. Whilst you can work from rough figures initially, your IP will want accurate figures from bank statements, wage slips etc, so you may as well pull everything together now. Your budget should include:
- Your wages (after tax and NI)
- Any other income (pensions, benefits, child maintenance, rent paid by lodgers etc)
Your savings or investments
- Bills (including your rent or mortgage, council tax, utilities, insurances, internet, student loans, mobile phone etc)
- Living costs (total up how much you pay each month for groceries, clothing, medical costs, household repairs etc)
- Transport (car loan; petrol, bus, train or taxi fares; breakdown cover, road tax)
- Family costs (vet bills, school uniform costs, childcare, school meals, pocket money etc)
- Leisure (list how much you spend on going out, gym memberships, takeaways, Netflix subscriptions, holidays, smoking, drinking, gambling etc)
- Payments towards savings or investment
List all the arrears you have, the total owed to each creditor, and any monthly repayments you are managing to make towards them.
Gather all your documents
For everything you receive and everything you pay, put the evidence together. That could be letters, payslips, credit agreements or emails, but try to ensure that anything you’ve listed in your budget has some written evidence to back it up.
Is it worth hiding anything from my IP?
It really isn’t. You mustn’t hide additional debts as your IP needs to know that you can afford your IVA. If they know you can’t afford it at the outset they may be able to offer an alternative. If they find out later, your IVA could fail and that may leave bankruptcy as your only option.
It’s also not worth hiding income, because if it later comes to light you’ll be made to repay it and your IVA could be extended.
Finally and most critically, lying to an insolvency practitioner is illegal and you could face a fine or prison term for doing it.
Can I get an IVA in Scotland?
No, but you can apply for a Scottish trust deed. These are often called ‘Scottish IVAs’ although trust deeds are not IVAs and there are numerous differences between the two. In terms of preparing to arrange a trust deed, however, the process is similar and the above guide should leave you well prepared.
Are IVA’s a government backed scheme?
IVA’s were introduced in 1986 and form part of the Insolvency Act (1986) to help people who are struggling to pay their debts. Unlike debt management, they are a legislated and formal debt solution meaning that the IVA agreement is legally binding, which can help to eliminate harassment from creditors.
Will I lose my home in an IVA?
Unlike bankruptcy, you wouldn’t usually lose your home in an IVA. If you own your home and have equity you may be required to release it so the IVA company can pay your creditors (that is, the people and organisations to whom you owe money). Read more here.
Will an IVA affect my credit rating?
Your credit rating will be affected whilst on an IVA and will stay on your credit file for up to 6 years. Any debt solution will affect your credit rating, but at the same time if you’ve missed payments and defaulted then your credit file will be affected anyway, as a default also stays on your file for up to 6 years. Read more here.
Do I need to know who I owe before I apply for an IVA?
It’s not a problem if you cannot remember all the people you owe money to before you apply for an IVA. A lot of people forget as they may have been taken out a long time ago. We have systems which can find all your debtors.
How much debt can I write off with an IVA?
The amount of debt that can be written off with an IVA very much depends on personal circumstances, such as your current employment status, debt level and disposable income. The maximum is 90% of unsecured debt but the average is around 60%.
How can I apply for an IVA?
There are 4 ways to apply for an IVA. 1: Call us on 0800 193 1024. 2: Apply online here. 3: Chat with us on live chat. 4: Apply through our Facebook page. The IVA application process is very simple and can be setup in as little as 24 hours. The speed usually depends on how quickly you can get information to us.
I’m thinking about an IVA. But what happens if I have no money spare at the end of the month?
It’s still worth exploring options with a debt management professional. They may be able to help you make your budget stretch further. If not, they will be able to give you advice about which is the right debt solution tool for you. That could be an IVA (in England, Wales or NI) or a protected trust deed (in Scotland) but there are several other potential options.
What happens if my circumstances change?
Talk to your IVA insolvency practitioner. They may be able to get agreement from creditors to a temporary reduction in payments or a longer repayment period to help you over a difficult period.
Why is my bank taking money from my account to pay my debts?
Banks hold an automatic ‘right to offset’. This means that if you have money in a bank account and unpaid loans or credit cards with the same lender, they can take the money in the account to pay off the debts. More confusingly, this can also happen when the debt is owed to a company also owned by your bank.
So, for example, if your bank account is with HSBC and you have an unpaid credit card with M&S Bank or First Direct, a right to offset could be used to pay those debts, because HSBC owns all of them.
You can find more about which banks are subsidiaries of other banks here.
In an IVA, and to avoid the right to offset, you may be required to switch bank accounts.
Will an IVA affect my credit rating?
Yes. The record of the IVA will remain on your credit file for six years from the date the IVA begins.
Will I still be able to get credit with an IVA?
Getting credit is harder with an IVA. If you want more than £500 of credit you’ll need permission from your insolvency practitioner in most circumstances. The chances of credit being approved are less, and any credit you are able to secure is likely to cost more.
Bear in mind, however, that an IVA (and a Scottish trust deed) is designed to help you escape debt, not find new sources of it.
If I choose an IVA, do I have to deal with my creditors directly?
No. In fact, you can’t set up an IVA without an insolvency practitioner who will handle all the to-ing and fro-ing between creditors. Assuming you qualify in other ways (see above) that makes an IVA ideal if you’d rather not speak to your creditors.
To find out whether a protected trust deed could be the right route out of debt for you, talk to us.
- Apply For An IVA
- Is An IVA Worth It?
- Are IVAs a Government Scheme?
- What If I Can’t Pay My IVA?
- Can I Get An IVA If I’m Self Employed?
- Rebuilding My Credit Rating After An IVA
- IVAs: What Will I Need To Show My Insolvency Practitioner?
- Who’s Most Likely to Need an IVA?
- How Much Does An IVA Cost?
- Can I Afford An IVA?
- IVAs – Can I Lose My Home?
- IVA And Trust Deeds | Whats The Difference?
- How Will My IVA Affect My Parents?
- An IVA Mythbuster
- Can An IVA Be Rejected?
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here