If you undertake an IVA and owe money to your bank, perhaps in the form of a credit card, personal loan or overdraft, you will almost certainly need to open a new account with a different bank. The reason for this is that to resolve a debt problem, you need to be able to ensure that you are in full control of your money and keep your income separate from all your creditors.

If you need to open a new account, you should ask for a basic account only with no overdraft facility. You should be able to do this even if you have a poor credit rating.  There are many banks which offer this facility. Please follow this link for more information about opening bank accounts.

The short answer to this is no. 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 CAN NOT be forced, whereas, under the terms of a Bankruptcy Homeowners may be forced to sell their property. As long as the mortgage payments are maintained, there is no risk that the property will be repossessed in an IVA.

However, you should be aware that in the final year of an IVA a home owner would be expected to get a new valuation of their property and release any available equity for the benefit of their creditors.   Penalty charges, ability to pay and the Loan to Value will all be taken into consideration when deciding if equity can and should be released.

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 likely to be entirely dependant on you having sufficient disposable income to make a reasonable IVA proposal to your Creditors.

No. You cannot favour one creditor over another. All your unsecured debts including loans, credit cards, store cards, overdrafts, tax bills and even 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 which could then lead to you being declared bankrupt. 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.

If you need to leave some debts out of your arrangement then perhaps a Debt Management Plan would be better for you.

Although most personal debts can be included in an IVA, certain debts can not.

Secured Debt
Secured debts such as mortgages, secured loans and any items on Hire Purchase can not be included in an IVA. If payments on such loans are not kept up to date, this may lead to the repossession of the item that is secured. If you have mortgage arrears, a provision to repay these will have to be allowed for within your monthly expenditure before the calculation of your disposable income.

CSA Rent and Council Tax Arrears
A provision for the repayment of Debts such as arrears to the Child Support Agency (CSA), Rent and Council Tax will normally have to be made within your expenditure budget and paid in full.

Other debts that can not be 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.

You will only pay what you can afford each month based on the level of 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 so that they make sure the amount you are repaying is as much as you can reasonably afford. In addition to monthly disposable income payments, if you are a home owner, you will also have to agree to pay any releasable equity from the property to increase the overall amount that the creditors receive.

On average it takes 6-8 weeks to put an IVA in place. The process may take longer and will be largely dependant on whether you are able to provide all the required documentation in a timely fashion. Normally, you do not pay your creditors during this time, but would pay your monthly disposable income to the Debt Management Company or IP in the form of a Drafting or Instruction fee.

Put simply, creditors are prepared to accept an IVA proposal and in so doing write off debt because they are convinced that if you declared bankruptcy they would receive a smaller return than in the IVA. The bottom line for the creditors is “Half a Loaf is better than no Bread”. 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.

Provided you have met the terms of the agreement and maintained your payments, your creditors will write off any debt which is outstanding and you will be debt free. You are then in a position to start building up your credit score and can potentially borrow money in future. However you should not do so unless you are sure you are able to maintain to necessary monthly payments.

Yes you can. This is one of the significant advantages of an IVA over Bankruptcy. If you are a director of a limited company, you can continue to be so and enter into an IVA. You can also undertake an IVA if you are a sole trader. You will need to prove that your income from your business is sustainable and can be maintained for the duration of the IVA. This will be done by looking at your previous accounts and tax returns and forecast trading document for the coming year so you will need to make sure you can provide these.

It is important to realise that if you are contemplating an IVA, it is highly likely that you are in at least some arrears with your creditors already and thus are likely to have negative information on your Credit File. Undertaking an IVA will not make this any worse. An IVA will be recorded on your Credit File for a period of 6 years after the date it started. This will stop you from borrowing further unsecured credit while you are in the IVA.  Once your IVA has been completed, your credit file will start to improve and you will be able to borrow again if this is what you want to do.

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

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
• Bank overdrafts
• County Court Judgements (CCJs) 
• Outstanding balances after home or vehicle repossession
• Business loans for which you are personally responsible
• Personal tax debts

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.

A car must not be an extravagance, it would not be acceptable to the Creditors if someone was proposing an IVA and driving about in an unreasonably expansive car unless there was a very good reason for this.

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

Car HP
If you have an HP arrangement on your car and have been able to show the car as a reasonable expense, the HP can be included within your 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.

During an IVA
It is unusual to buy a house while you are still in an IVA. During the IVA, you will not be able to save for a deposit because all for your available disposable income must be paid to your creditors. However, once your IVA is finished, you should be able to save for a deposit very rapidly as the disposable income that you were paying into your IVA now becomes yours to keep and save.

It will be possible to re-mortgage your property while in an IVA but generally you will only be allowed to do this for the benefit of your creditors. If you have an IVA, then you MUST NOT enter into a new mortgage without first agreeing this with your IVA supervisor as there could be other ramifications. Your supervisor will advise you of these.

After an IVA
Many people worry about what their credit rating will be like after their 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 having a poor credit history. Specialist mortgage brokers will often be able to get mortgages for people post IVA. The most important factor in taking on a mortgage is that most lenders will ask for a deposit which will need to be saved for post IVA.

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 your unsecured Creditors 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 in place you will receive letters and phone calls from your creditors chasing payments. If this happens then you can inform the creditor that you are in the process of proposing an IVA. Most creditors at this point will be content with that answer but you must be aware that some will not be.

If a creditor demands payment and states that they 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 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.

Remember that you are taking positive steps to deal with the whole debt, not just the one creditor 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!

Once the IVA is agreed, your creditors are no longer allowed to demand payments from you. All 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.

If your are in an IVA, your circumstances will be reviewed once a year as standard. However, if you have any changes to your circumstances, it is very important to inform your insolvency practitioner immediately. 

A Change for the Better
If during your IVA, you are able to pay more to your creditors, perhaps because you have received a pay rise, then you will have to do so. You must tell your IP of this change straight away. You may not have to pay 100% of your increased pay into your IVA. The amount that your IVA payment will increase will depend on whether you have had any changes to your monthly living expenditures and how sustainable the increase is.

A Change for the Worse
If you are in an IVA and your financial circumstances change for the worse meaning that you can no longer maintain your payments, 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. The most usual reason for your personal circumstances to change is that you have a problem with your job which effects your income. Of course this situation could equally arise due to illness or other unforeseen circumstances.

There are generally three different scenario’s to consider:

Scenario 1 - Your income reduces for a while and then goes back to normal
For example You loose your job and it takes a few months to find a new one. 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 - Your income reduced permanently
For example, you loose your job and find another one but your new take home pay is less than your previous pay and you cannot continue to make your originally agreed IVA 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. 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 - Your income is lost entirely
For example you loose your job and there is no prospect of you securing a new one meaning that you can not make any further IVA payments at all. If you can not 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.