If you receive a county court judgement this could lead to money being taken directly from your wages and even a charge being put against your house. An Individual Voluntary Arrangement (IVA) will prevent this action.

If you owe money which you are unable to repay, the creditor may apply to the court for a county court judgement (CCJ) against you.

A CCJ is a court order stating that you must repay the debt that you owe.

If a CCJ is taken against you, this in itself is not enough to force you to pay. However, if you ignore the judgment, the creditor then has the opportunity to take further action.

Implications of a CCJ

I is widely understood that a CCJ will be registered against your credit file for 6 years and so will make it more difficult for you to borrow in the future. However, there are other effects that you should be aware of.
 
If you do not meet the terms of the CCJ, your creditor can apply for an attachment of earnings against you. This would mean that a monthly payment towards your debt would be taken directly from your wages.

If you are a home owner, once a CCJ is in place, it is increasingly likely that the creditor will apply for a charging order against your home.

If granted, it is unlikely that you would be forced to sell your property. However, the debt becomes secured meaning that when you do come to sell, the debt will be paid before you receive any of the proceeds.

How will an IVA help?

If you have already received a CCJ or believe that you are at risk of getting one, an individual voluntary arrangement will protect you from further action.

An individual voluntary arrangement (IVA) is a legal agreement with your creditors allowing you to settle your unsecured debt over a five year plan. At the end of the agreement any remaining debt is written off.

Because the IVA is a legally binding agreement, it overturns many previous actions which have been taken against you by your creditors. As such, if you already have a CCJ or even an attachment of earnings against you this will be cancelled.

Once you are in an IVA, your creditors can not issue any new CCJ applications.

The one area that an IVA will not help is if a charging order has already been put against your home. A charging order cannot be overturned and although the debt can be included in your IVA, it remains secured against your property. 

Alternative solution

A different solution which is widely used to manage debt is the debt management plan (DMP). A DMP allows regular monthly payments to creditors to be reduced to an affordable amount.

However, DMPs are not legally binding. As such, a DMP does not overturn a CCJ or attachment of earnings if one is already in place.

In addition it will not prevent creditors applying for additional CCJs and in particular a charging order against your property or attachment of earnings in the future.

Where to start

If you are struggling with debt, the best advice is always to take action early. The sooner you implement a debt management solution such as an IVA or DMP, the less likely it will be that you will receive a county court judgement.

If you want to be sure that you will not get a CCJ in the future or if you already have one which need to be overturned, you will have to use an IVA.

An IVA will prevent any future legal action being taken against you.

However, if your debt has already been secured against your property in the form of a charging order, this cannot be overturned, even by using an IVA.

For this reason, as a homeowner, if you are struggling with debt, it is important to act quickly to protect your house.    

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