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What happens at the end of my IVA?

Thu, 30 Mar 2023 08:36:38 GMT

If you’ve been in an Individual Voluntary Arrangement, you’ve stuck to the rules, and you’ve lived within your means, then you’ve already done the hard work. As you approach your final payment, you’re probably wondering what happens next.

In this guide we’ll explore what happens at the end of your IVA, including when your debts will be written off, when you’ll receive your certificate of completion, and what you need to do to rebuild your credit profile.

Your remaining debt is written off

The first, and best, thing that happens when your IVA is completed is your remaining debt will be written off.

During the course of your arrangement, you’ve worked hard to put the majority of your income towards repaying your debt. Now it’s time for the payoff.

Any remaining unsecured debt that hasn’t been covered by monthly payments to your Individual Voluntary Agreement will be completely written off. Your creditors will no longer be able to contact you for payment and you’ll officially be debt free (aside from any secured debt you carry, like your mortgage for example.)

You’ll receive a certificate of completion

The Individual Voluntary Arrangement will be recorded, and a completion certificate will be provided to you by the Individual Voluntary Arrangement manager.

When your IVA is completed, you’ll be sent a Completion Certificate, which will confirm this. It verifies that you’ve finished the plan successfully and that your Insolvency Practitioner is no longer the Supervisor of your arrangement.

It’s critical to get your completion certificate since your IVA won’t be completely finished until you do. If you don’t acquire a certificate, any additional money earned may have to be paid into the arrangement until it is officially closed.

It normally takes six to eight weeks for your IVA Completion Certificate to be sent out to you, but we will make sure we get it to you as soon as possible.

Your creditors will be notified

When you get your certificate of completion, we will also send a copy of your to your creditors.

This demonstrates to creditors that you have successfully completed your IVA, your debts to them are settled, and that you no longer hold any responsibility for any of the debts included in the arrangement, so they shouldn’t contact you any longer.

You can start rebuilding your credit score

As you’ll no doubt already know, being part of an Individual Voluntary Arrangement will damage your credit score. It highlights to lenders that you’ve had debt trouble in the past, and causes them to view you as a risk for future borrowing.

The damage to your credit score isn’t permanent, but once you’ve officially been released from your IVA, you will have to put some work in to gradually improve your credit score.

One of the best ways to do this is to take on a new line of credit. This might sound strange considering credit cards may have been one of the things that led you into debt trouble in the first place, but you can’t build up a positive credit history if you simply avoid credit altogether.

The most important thing is to be sensible, and deal with a lender you can trust. That’s where we can help. Creditfix launched its own partner network of financial services companies in order to help people like you rebuild their credit after an IVA.

Should I change my bank account after an IVA?

Thu, 30 Mar 2023 08:33:33 GMT

As you’ll no doubt already know, we recommend all of our clients change their bank accounts upon entering an IVA. That helps protect you from creditors who may try to freeze or take funds from your account, even though you’ve entered an arrangement to deal with your debts.

But what about once your IVA is finished? In this guide, we’ll explore whether you should consider setting up a new bank account after your IVA, the potential benefits of doing so, and which banks are best suited to people who have completed an Individual Voluntary Arrangement.

Why should I consider changing my bank account after an IVA?

First up, we want to be clear on something – there’s no obligation for you to change your bank account once you’ve successfully completed your IVA.

You already changed your bank account once, when you first set up the arrangement. This offered you extra protection from your creditors during the arrangement, and now that your IVA is coming to an end and your debts are about to be settled, your existing bank account shouldn’t be in any danger.

That being said, many of our clients like to make a completely fresh start once their IVA comes to an end. That process can involve setting up a new bank account, one that hasn’t been associated with making IVA payments over the previous five or six years.

Will I have trouble opening a new bank account after my IVA?

As someone who has recently left an IVA, your credit rating won’t be in the best position. As you know, even though an IVA is a tool to help you deal with your debt, it will have a negative impact on your credit score, at least temporarily.

Your credit rating will be impacted for the first six years after your IVA has concluded, and having a lower credit score will send a signal to potential lenders that offering money to you represents a risk.

These lenders may include certain high street banks, many of whom will reject people for new bank accounts if their credit rating fails to clear a certain threshold. That doesn’t mean you can’t open a new bank account after your IVA, but it does mean you have to choose your bank carefully.

How long will it take me to improve my credit after an IVA?

Improving your credit score is an ongoing process, whether you’ve been in an IVA or not. No matter how much you focus on it, it’s never really ‘complete’.

So while you should never stop striving to improve your credit rating, you will find that life after an IVA gets easier once six years have passed from when you completed your arrangement. That’s when you IVA will be wiped from your credit history, and your credit score will improve as a result.

Until then, you can make gradual improvements to your credit score by building up a positive payment history which demonstrates to lenders that you now have a record of repaying what you borrow.

How do I rebuild my credit after an IVA?

Thu, 30 Mar 2023 08:29:49 GMT

Coming to the end of an IVA is a huge achievement but the hard work doesn’t end there.

Unfortunately, an IVA will affect your credit rating and you can expect your score to sit within the 200 to 330 range at the end of your arrangement – which is rated as poor

However, there is a silver lining. Your IVA journey has proven that you can live within a budget and take responsibility for your finances, now it’s time for the next step.

It’s time to start rebuilding your credit score and begin to show creditors you’re a solid candidate for future credit.

It can be a long process but it’s always worth the work to help you achieve your future financial goals.

So, your arrangement is coming to an end. What next?

Prepare for the end

When you make your final payment towards your IVA, we’ll write to you to let you know.

Then, within six months, we’ll issue you your completion certificate. As soon as you receive this, it’s a good idea to send a copy to each of the three main UK credit reference agencies; Call Credit, Equifax and Experian.

You should also check that your IVA has been marked as completed on the Insolvency Register.

Check your score

The first step of rebuilding your credit score is to know exactly where you stand right now. You can check your credit score with either ClearScore, Equifax or Experian.

It’s also a way of making sure there are no inaccuracies on your credit file. If you do find anything that doesn’t look right, you can contact the credit reference agency to find out more.

Get on the electoral roll

Here’s a quick win for your credit score – sign up to the electoral roll at your property. It reassures lenders that you have a permanent address and is a little extra proof that you are who you say you are.

It’s also something that’s easily forgotten if you’ve recently moved to a new home. It’s straightforward to register to vote online, just visit the gov.uk website.

Be cautious

If you have a joint credit account or have made any form of financial application with someone else in the past, it may be noted on your credit report that you’re financially connected.

While this can be a great thing when you both make your payments on time and have strong credit, if your partner has poor credit, this can potentially drag down your score. If you have a joint account you don’t use with someone with poor credit, you could improve your credit score simply by closing it.

Find the best credit building options for you

Throughout the life of your IVA, however long that is, applying for credit isn’t an option. But just because your agreement is winding down, it doesn’t mean that you should rush out into the world and start signing up for every credit card going.

Making multiple credit applications – and being rejected for a low score – could harm your credit score further. Instead, you should carefully choose a credit card that’s designed for rebuilding your credit, and make sure there’s a high chance of approval before you go ahead and apply.

Taking all these steps will not only help you rebuild your credit but also safeguard your credit score for the future.

Can I get a mortgage after an IVA?

Thu, 30 Mar 2023 08:26:09 GMT

Getting a mortgage is a big step in life. Anybody who reaches out to a mortgage company will need to jump through certain hoops, but for people in an active IVA, accessing a new mortgage is even more challenging.

In this article we’ll explore the process of getting a mortgage while in an IVA, starting with what an IVA is, how an IVA impacts your ability to access a mortgage, the steps you need to take to get a mortgage during an IVA, and whether getting a mortgage is easier after your arrangement has ended.

Can I get a mortgage during my IVA?

Although those in an IVA naturally focus most of their attention on repaying debts during their arrangement, the rest of their lives don’t stop while they do. People in an IVA want to pay back what they owe and work towards clean credit so they can get on with things – including buying a home.

While it is possible to get a mortgage with an IVA, there are problems to overcome. Like all debt solutions, IVAs affect a person’s credit history. That means finding a mortgage broker who will lend to you could be a challenge.

Every mortgage application is different, so it’s entirely possible that you will find a mortgage that suits you. Because of the challenges associated with IVA mortgages, however, you should always seek debt advice before going ahead with an application.

How does an IVA impact my mortgage application?

IVAs carry implications for homeowners and would-be homeowners. If you have a mortgage going into an IVA, and have a certain amount of equity in your home, you may have to release that equity towards your arrangement. If you want to buy a new home during the IVA, there are several factors to consider:

Disposable income

The first and most obvious impact an IVA will have on your getting a mortgage is its effect on your disposable income. First and foremost, an IVA is a legally binding debt solution. Your first priority during your arrangement is to pay back your debts.

Your repayment plan is based on what you can afford, taking into account your income and outgoings. If you have a mortgage going into an IVA, your IP will consider that when building your IVA proposal. Once you enter that proposal, however, you may not have enough disposable income left to cover a mortgage payment on top of your monthly debt repayments.

Credit history

All debt solutions affect a person’s credit. If you have an IVA to your name, it will show that you are taking responsibility for your debt and rebuilding your credit score – but it will also highlight your credit history to lenders, who will consider any financial issues you may have had in the past.

The average mortgage lender will view a buyer with an IVA as a risk. When considering your application, they will check your credit report and factor in any debt you hold – making it more likely they will reject you for a mortgage.

Affordability

If you do find a broker willing to lend to you, it’s unlikely you will qualify for the best mortgage rates. Any lender will run routine credit checks, which will flag up your previous poor credit. This has a knock-on effect on the interest rate you’re offered, and you may be asked to put down a larger deposit, making purchasing a new home during an IVA more expensive overall.

How do I get a mortgage during my IVA?

If you are determined to buy a new home during your IVA, it is possible. Because an IVA is a legally binding agreement, however, there is a process you must follow before you reach out to lenders.

Get the permission of your Insolvency Practitioner

For the length of your IVA, your IP will act in your name. That means they have the ultimate say on your financial affairs during that time, which includes getting a mortgage.

As an IVA holder, you will have to ask your IP’s permission to access new credit over £500. Getting a mortgage falls into that category.

Your IP will consider your financial situation, including whether you have kept up with your debt repayments, and how much disposable income you have left over. If they believe you can afford it, they may grant your request to get a mortgage.

Shop around for interest rates and deposits

Unfortunately, higher interest rates are a fixture of IVA mortgages – the interest rates you’re offered are likely to be higher than for someone with a healthy credit score. Any high street mortgage lender will view an IVA holder as higher risk, and will try to mitigate that risk by charging higher interest.

If you are in an active IVA, any deposit you put down is also likely to be significantly higher. Putting down a deposit on a property gives lenders more security that you will repay your debt.

Because someone in a debt arrangement is in a more financially precarious position to begin with, a lender will expect a higher lump sum in order to approve the mortgage.

Be wary of specialist lenders

Many IVA holders turn to specialist mortgage lenders when they want to buy a home. The appeal is obvious – unlike high street lenders, who may reject you out of hand, specialist lenders will always consider applications from IVA holders.

Although your application is more likely to be accepted, you will face similar problems with an IVA mortgage – most notably, higher interest and deposits. Specialist lenders know they are dealing with a captive audience (those who might struggle to get a mortgage elsewhere). That’s why it’s important you seek debt advice before pulling the trigger.

Can I apply for a mortgage after an IVA?

Yes, you can absolutely apply for a mortgage after an IVA, and it may increase your chances of success. Getting a mortgage during an IVA can be difficult.

Once your IVA has ended, you are no longer bound by financial restrictions. Your disposable income becomes yours again, and you can put it towards whatever you like – including getting a mortgage.

It’s understandable if you want to get on the property ladder right away, however certain mainstream lenders will refuse to work with people who have been in an IVA so recently.

How long after an IVA can I get a mortgage?

It’s easier to get a mortgage after an IVA if you wait a few years. If you apply immediately after, you will come up against the usual problems – higher interest, higher deposits, and higher chance of rejection.

That’s because your IVA, and the impact it has on your credit history, is still fresh in the eyes of the lender.

It’s a safe bet that the longer you wait to get a mortgage after an IVA, the more likely it is you will be accepted. There are a growing number of lenders who are willing to consider mortgages for IVA holders so long as the IVA is at least three years old, the holder has kept up with payments, and they’re able to see solid evidence that you’re rebuilding your credit score.

How badly does an IVA affect your credit rating?

If you get an IVA, it will go on your credit record, and will lower your credit score as a result. Your credit score (or rating) is a three-digit number between 1 and 999 – the higher the credit score, the more likely lenders are to let you borrow money for loans, mortgages, and other forms of credit.

There are various credit reference agencies – independent bodies approved by the Financial Conduct Authority (FCA) – that allow you to check your credit score. The three main reference agencies approved by the Financial Conduct Authority are Experian, TransUnion, and Equifax.

Your rating is based on the information carried in your credit report, and details of your IVA will be included, so your rating will go down. The good news is that details of any debt repayment plan are only listed on your report for a fixed amount of time.

How long does an IVA stay on your credit file?

For most, an IVA stays on your credit report for the length of time it takes you to complete the agreement – usually six years. During those five or six years, the agreement will be listed on the Individual Insolvency Register – a public register which creditors, including mortgage lenders, can search freely.

After the fix or six years has elapsed, your IVA will be removed from the public Insolvency Register and expunged from your credit history, leaving you free to rebuild your credit file.

One thing it’s important to note is that the five or six years an IVA shows up in your credit file is a minimum – even if you take advantage of the windfall clause to settle your agreement early, your IVA will still remain on your credit file for five or six years from the date the arrangement was approved.

Do I have to declare an IVA when applying for a mortgage in future?

In a word, yes. Mortgage applications come with many questions – questions brokers expect honest answers to. They are likely to ask you if you have had money trouble in the past, including whether you have used a debt solution or declared bankruptcy.

It’s important that you tell the truth. If you lie on your application, you will be committing fraud, and could end up in more trouble in the future.

Can I get car finance after an IVA?

Thu, 30 Mar 2023 08:20:25 GMT

If you do choose to enter into an IVA, accessing any kind of credit will be more challenging, even once the agreement ends. That includes car finance.

In this article, we’ll explore how an IVA impacts your ability to get a car finance agreement, and the options available to someone who has previously been in an IVA.

What is car finance?

Car finance is a contract that allows you to purchase a car by making periodic payments. If you want a vehicle but don’t have enough money to buy it outright, a finance agreement may be the best solution.

You take out finance on a vehicle by borrowing credit from a lender and repaying the total amount of cost over time. If you make your payments on time, you may have the option to purchase the car outright at the conclusion of your loan agreement, or return it and go somewhere else.

Does an IVA affect my ability to get car finance?

Yes, any type of borrowing is affected by being in an IVA. You usually need the approval of the Insolvency Practitioner (IP) dealing with your case to obtain credit worth more than £500 if you’re still in your IVA, so you will definitely need their agreement if you want to get automobile financing.

If you don’t get the permission of your Insolvency Practitioner before you get car finance, you could be in breach of the terms of your Individual Voluntary Agreement. This can lead to your IVA failing.

Once you have reached the end of your IVA, you will no longer need the permission of an Insolvency Practitioner in order to get a car finance agreement, however car finance companies may be reluctant to lend to you.

Why does having an IVA make it harder to get car finance?

As you are aware, an Individual Voluntary Agreement is a type of insolvency, which means the terms of the agreement are kept on the formal Insolvency Register as well as your credit file.

Details of your IVA are held publicly and will lower your credit score. An IVA also gives an indication to lenders that you have struggled with ‘bad credit’ in the past, so mainstream lenders are more cautious when it comes to entering a finance agreement with people post-IVA.

Is there car finance for people with bad credit?

New There are companies out there which specialise in providing car finance to customers with poor credit scores. Businesses like Red Potato or moneybarn target people with bad credit, or histories of struggling to manage debt.

Their appeal is obvious. They make it possible for customers to access car finance, even if they have:

An existing IVA
A previous IVA
County Court Judgements (CCJ)
Been declared bankrupt
Been unable to raise a deposit for the vehicle

Just because it’s possible, however, doesn’t mean it’s recommended. It’s important to be cautious when approaching lenders like these – borrowing money when you have a poor credit history can be very expensive.

If you have a CCJ taken out against you, for example, a specialist lender knows you won’t get finance elsewhere. They will use that CCJ to charge you higher premiums, and make you pay more to finance your vehicle than you would anywhere else.

What’s the best way to get car finance after an IVA?

When you make your final payment, the details of your IVA will be removed from the Insolvency Register. It will stay on your credit report for a year after your arrangement ends, depending on if your IVA lasts five years or six.

Even though you no longer need anyone’s permission to apply for credit, having an IVA listed on your credit report can make it challenging to find a suitable lender.

In this instance, waiting until you have rebuilt your credit score before applying for car finance is the best option, as you will be able to access better deals.

Can I start a business while in an IVA?

Thu, 30 Mar 2023 08:15:42 GMT

When IVAs (Individual Voluntary Arrangements) were first introduced, they were actually designed with business owners in mind. The 1986 Insolvency Act introduced IVAs as a way for businesses to deal with their debts.

This benefitted both businesses and their creditors, since it meant that they could avoid bankruptcy, and be given another chance to flourish, whilst creditors made back more of their money than they would if the company had been bankrupted.

IVAs can still be used by business-owners today, but because they are a form of legal insolvency, people often wonder what the implications of an IVA are for existing or new businesses. We clarify this below.

If you’re self-employed

It is entirely possible to enter into an IVA if you are self-employed, but there are some key differences to bear in mind.

Flexible contributions

If you are self-employed, your monthly income is likely to be more irregular than someone who works for a company.

Because of this, what you pay towards your IVA can be more flexible. You will need to prepare a cash-flow statement to advise your Insolvency Practitioner (IP) how much your income fluctuates from month to month.

Self-employed IVAs are designed to take this into account, and you might end up increasing or reducing your payments over the course of the IVA. This is totally acceptable, as long as you keep in touch with your IP to advise them of changes in your circumstances so payments can be adjusted.

Business-related credit

Understandably, being in an IVA reduces your access to credit. However, when someone who is self-employed enters into an IVA, things can be slightly more flexible. You will still need your IP’s permission to obtain more than £500 of credit, but you may be able to exclude one line of business credit from your IVA, and repay them separately, in order to continue your working relationship.

Business bank accounts

If your business account is overdrawn, and you need this line of credit to cope with the running costs of your business, you may be able to keep the account. However, if it is overdrawn by a large amount, it might be more sensible to include it in your IVA agreement.

Additionally, if you hold other lines of credit with the same bank, such as a business loan, the bank may exercise the ‘right to offset’. This means they could seize money paid into your business account to offset your other debts. If this is a risk, opening a new business account, and including the old one in your IVA, is usually the best option.

Limited companies

IVAs are available regardless of whether you are a sole trader or own a limited company. It’s also possible to register your business as a limited company whilst you are in an IVA. Whilst in an IVA, unlike bankruptcy, you are completely free to be the director or shareholder of a company, so making the decision to go limited will not be affected by your IVA.

It is important to carefully consider any changes to your employment during an IVA, though, as you will need to continue making your agreed-upon payments in order to successfully complete it.

As mentioned earlier, some flexibility is allowed, but if you will be unable to make your original payments for an extended period of time, your creditors will have to agree to the lower amount, which they might not be willing to do. This could put your IVA at risk of failing, which can sometimes lead to bankruptcy.

Starting a new business during an IVA

There is nothing stopping someone who is in an IVA from establishing a new business. Like all financial decisions, this should be carefully considered, however. Although starting a new business can be the right long-term decision, it may be advisable to wait until you have completed your IVA, or even until you have rebuilt your credit score.

This is because you may struggle to obtain credit and a business bank account during or immediately after an IVA – when potential banks, and other lenders see you have entered into an IVA, they will know that you have had trouble repaying credit in the past and be more cautious about lending to you. Any potential changes to your employment status should be discussed with your IP.

Self-employed IVAs and your assets

One key advantage which IVAs have over bankruptcy is that you will be able to retain your assets – including your property if you are a homeowner. With a self-employed IVA, you can still keep all of your assets in the vast majority of cases, but there are a few exceptions you should consider.

IVAs were originally designed with business owners in mind, so it makes sense that this solution for repaying your debts disrupts trading far less than bankruptcy would. Nonetheless, there are instances where a few assets might need to be sold.

Business-related assets

Your creditors are likely to make a far better return on what they lended you if your business continues to operate. For this to happen, of course, you will need to retain the tools, equipment, vehicles, or technology associated with the business, and will not be required to relinquish any of these assets. In a few cases, you may be asked to replace very valuable work-related assets with less expensive ones, and pay the difference towards your IVA.

For example, if your business requires you to travel, and you currently own a valuable luxury car, you might be asked to replace it with a practical, inexpensive alternative. Even if you are asked to replace a business-related asset or to, you will never be asked to forego something which is necessary for your business to function.

Personal assets

As mentioned earlier, IVAs protect your assets. In some rare cases, you might be asked to sell a highly valuable vehicle. However, if you can prove that the vehicle is necessary for your work, which it is likely to be if you are self-employed, you will be able to keep it, or at least a cheaper model. If you own a low-value vehicle, you will probably not be asked to sell it even if it is not deemed necessary to your work, since your creditors would be unlikely to really benefit from its sale by the time administrative costs were covered.

Your home

Unlike going through bankruptcy, having an IVA does not put your home at risk. However, if you have enough equity in it, you may be asked to release some in the final year of the IVA’s term by remortgaging. Exactly what happens will depend on how much equity you have in your property:

If you have £5,000 or less worth of equity

If you have little or no equity in your home – £5,000 or less – you will not be asked to release it for your IVA. Instead, you can either make an extra year’s worth of monthly IVA payments, or a third party can make a lump-sum payment in lieu of home equity, agreed upon by your creditors. If you do not own a home, you will also need to make either an extra twelve payments or have a third party offer a lump sum.

If you have more than £5,000 of equity

If you have significant equity in your home – more than £5,000 – you will be asked to release some in order to complete your IVA. You will not be asked to release all of your equity, however, but up to 85%.

In some cases, it is impossible to release equity because mortgage providers refuse to remortgage a property. If this occurs, you must instead agree to make an additional 12 months of payments, or have a third party make a lump sum payment towards your IVA on your behalf.

Will having an IVA affect my future employment?

Thu, 30 Mar 2023 08:11:12 GMT

When deciding whether an IVA is the right debt solution is right for you, it’s important to consider how it could affect your day-to-day life.

One of the biggest concerns people often have is that an IVA could affect their employment.

The good news is that having an IVA won’t affect most jobs but you should be aware of some exceptions.

Here we offer a guide to how an IVA could affect your employment now and in the future.

Will an IVA affect my job?

Entering into an IVA doesn’t typically have an impact on employment, however, there are a few exceptions.

There are some jobs – often in the financial sector – that could be impacted by an IVA.

You should be aware that IVA could impact your career if you work in any of the following industries:

Financial services
Accountancy
Legal
Property conveyancing
Police
Prison service

You may not be able to continue to practice or your roles and responsibilities may change if you enter an IVA.

That’s why it’s important to check if your role could be affected by the arrangement. You can do this by checking the terms and conditions of your employment contract, speaking with your HR department or asking your trade union or professional body.

Will my employer find out about my IVA?

Your employer can only find out about your IVA in certain circumstances.

They may carry out financial checks, such as a credit check, but you must be made aware of it in advance. You should also check your contract to make sure your employer has the right to do so.

An employer could also search the public Insolvency Register – a list of all active IVAs in the UK – but this is rare. Your details will appear on the register for the duration of your IVA and three months after its completion.

Can an IVA affect me in finding a job?

An IVA isn’t likely to affect you if you’re applying for the job unless you work in the sectors we’ve previously mentioned.

Most employers don’t run the types of credit searches that would show an IVA but it’s always best to check when applying.

It’s also important to remember that credit checks are more likely if you’re applying for a role where you’re able to access other people’s money – like working in a bank, for example.

You should also remember that prospective lawyers are legally required to ask for permission in advance before running a credit check.

How else will an IVA impact my life going forward?

The biggest impact an IVA will have going forward is by negatively impacting your credit rating, usually for a period of six years.

While that might sound daunting, it’s important to remember two things. First, while an IVA might hurt your credit score in the short-term, it will do a lot less damage to your credit overall than allowing your debts to grow, or defaulting on your repayments.

Next, the damage to your credit rating is only temporary. As soon as six years pass, your IVA will be wiped from your credit history.

Can I pay off my IVA early?

Thu, 30 Mar 2023 08:08:26 GMT

Your financial circumstances might change during the course of your IVA and you might find yourself in the position where you could potentially increase the monthly payments towards your debts, or even pay off your remaining debts to all your creditors at once.

In this guide we’ll explore the issue of paying off an IVA early, including whether it’s possible, if it’s a good idea, and how you might go about paying off your IVA early if you found yourself with enough money to do so.

Can I finish my IVA early?

In a word, yes. There is no restriction on the minimum length of an Individual Voluntary Arrangement (IVA). While most people in an IVA take between five and six years to repay lenders through their agreement, debt solutions don’t necessarily have to take that long.

The length of the IVA will be dependent on your personal circumstances and the size of your monthly repayments. These are worked out by your Insolvency Practitioner, a debt professional licensed by the Insolvency Practitioners Association, based on what you can afford at the time.

If your circumstances change, the term of your IVA might change, and so might the length of the agreement. An IVA can be completed early so long as you are able to repay your total debt, or you can come with a ‘full and final settlement’ offer which your creditors accept.

What is a full and final settlement?

A full and final settlement is a lump sum of money that you can offer your creditors so that it can be put towards your debts. If your creditors accept your proposal, you can end your IVA early.

It’s up to you to decide how much money to offer your creditors. How much that is depends on various factors, including who your creditors are, how big the lump sum is, and your chances of being able to pay off the full amount over time.

You shouldn’t offer to pay the full amount in your settlement – if your lump sum is large enough, your creditors are likely to agree to a debt write off for the remaining money you owe.

That said, you should offer as close to your total debt as you can afford. By agreeing to a settlement offer, your creditors are accepting a loss on your debts- the closer the offer is to the total amount you owe, the more likely each creditor will be to accept your offer.

What happens once I make an offer to settle my IVA early?

Approach your Insolvency Practitioner

Any decision to pay off your IVA early will need to go through your Insolvency Practitioner. They will consider whether to move ahead with the early payment based on whether they think your creditors will agree to it.

Variation meeting

If your IP decides you have a realistic chance of your proposal being accepted, they will set up what’s known as a variation meeting. This gives creditors the chance to review your proposal. If 75% of your creditors agree to a payment plan, it will be agreed by other creditors.

You’ll need to have a strong reason for wanting to clear your IVA early, and you need to show that you’ll avoid financial trouble by paying it off early. If you borrow money to pay it off, you’ll be back to square one if you can’t afford the new debt, so make sure you have a realistic plan with the finances in place.

Should I remortgage my home to pay off an IVA early?

If you’re looking to pay off an IVA early, you need to make a reasonable offer to your creditors to persuade them to accept your proposal. That’s why some homeowners use remortgaging as a way to raise a lump sum.

Remortgaging is a way of releasing equity in your home and using that money for another purpose. In the case of an early IVA settlement, you would use the money raised to offer your creditors a lump sum payment that covers a portion of the total debt they’re entitled to. In exchange, they’ll agree to end the IVA early.

Remortgaging isn’t always the best way to reach an early settlement, however, because it can be difficult to remortgage your home during an IVA.

Most people in an IVA who hold significant equity in their home are asked to look into remortgaging anyway, because it would allow them to avoid having to spend a sixth year in the arrangement. You would need to have a lot of equity in your home to end your IVA before year 5 – that’s why it’s important to discuss with your IP first before agreeing to remortgage.

Is it a good idea to settle my IVA early?

There are many reasons why it might be a good idea for you to settle your IVA early. You get to enjoy the freedom of not being constrained by the terms of the IVA. You can start rebuilding your credit score more quickly.

Even if your proposal for paying your IVA off early is rejected, it is possible to continue your IVA payments as previously agreed, meaning you won’t be any worse off than before.

All that said, you should always seek debt advice and talk to your Insolvency Practitioner before making any serious change to your IVA agreement, as they’ll be able to give you a better idea of how the proposed changes will be received by your creditors.

If I pay my IVA off early, will it impact my credit score in the same way?

Unfortunately, settling your IVA early won’t prevent the arrangement from affecting your credit score. A settled IVA will still be listed on your credit report for at least six years from the date it was approved.

During that time it’s unlikely you will still be able to obtain large amounts of credit, such as a mortgage or certain credit cards, straight away. The good news is the earlier you end your IVA, the quicker you’ll be able to begin repairing your credit score and getting yourself back on track.

What is a ‘full and final’ settlement offer?

Thu, 30 Mar 2023 08:00:16 GMT

If you’re fortunate enough to be in a situation where you could repay your IVA in one payment you may want to consider a full and final settlement offer.

What is a ‘full and final’ settlement offer?

A full and final settlement offer, is also known as a Debt Settlement Offer (DSO). It is a solution for your debts that involves offering your creditors one large, lump sum payment to pay off your remaining debts, instead of continuing with your, usually unaffordable, situation.

Using this method, you may manage to get your creditors to agree to write off some of your debt upon receipt of a significant enough amount of your debts.

For example, you may be struggling to pay an amount of £150 a month for a remaining debt of £4,750 when you receive an inheritance of £3,000. You would then write a letter to your creditor explaining your circumstances and asking them to accept the £3,000 as the full payment to satisfy your debt.

Are creditors likely to accept a full and final settlement offer?

It might seem like creditors won’t accept a cut-price offer because it looks like they are losing money, but if you have been regularly missing payments, creditors will often prefer to receive a guaranteed payment than risk you becoming insolvent and being unable to pay them anything.

You can also use DSOs to settle multiple debts. For example, if you have 3 debts which are £500, £2,250 and £4,000, you might be able to use a windfall of £4,000 to pay off the total £6,750.

You must send letters to each of your creditors fully explaining your situation, and you must offer them a proportional amount of the available funds to settle your debts. This would mean that you offer £296.30, £1,333.33, and £2,370.37 to each creditor respectively.

Advantages of a full and final settlement

If accepted, you can have your debts solved very quickly. This makes it easier and faster to work towards being financially healthy and planning for your financial future.
As it is not an insolvency solution, you are not entered onto any insolvency registers

Disadvantages of a full and final settlement

Your creditors may not accept, particularly if they would make a substantial loss on your account
Very few people come across lump-sums that they are able to use to satisfy their debts. It is important that you don’t sacrifice money that you need to survive to create a ‘lump sum’.
Your account is often labelled ‘partially settled’ on your credit file for six years which lets future lenders know that you did not pay the full amount of your debt. This could affect your ability to take out credit, such as if you want to buy a house.

Useful tips for making a full and final settlement offer

Get everything in writing

You must get everything, such as your offer and their acceptance, in writing, otherwise your creditors might change their minds and you will have no proof that they agreed to your proposal.

Consider hiring a solicitor

You may want a formal agreement to be written up by a solicitor if the amount is particularly big.

Use a third party

Once you have written acceptance of the agreement, it helps your agreement to become more legally binding if a third party transfers the money to the creditor.

Update your credit reference file

You might want to make sure your credit reference file has been updated. You can ask your creditors for this, and your account should be ‘closed’ and your balance at ‘zero’

How do I prepare for life after my IVA?

Thu, 30 Mar 2023 07:55:22 GMT

If you’re like most people who have entered into an IVA, you’ve probably been counting down the days until the arrangement ends, and that’s perfectly understandable. But now that time is fast approaching, you may be wondering if there’s anything you can do to prepare for the end of your IVA.

In this guide we’ll explore the ways you can get ready for the end of your IVA, get your affairs in order, and ensure you’re ready to embrace your financial freedom.

Maintain your IVA payments

This may sound obvious, but even though you’re excited about your IVA coming to an end, it doesn’t mean you can lose focus on maintaining your IVA payments in the meantime. You haven’t worked this hard to fall at the final hurdle.

Your IVA payments will be taken right up until the final month of your arrangement, so for as long as you’re still in an IVA, making sure you continue to meet your monthly contributions should be your first and last priority.

This largely means just continuing to do what you’ve been doing – you’ve made it this far after all.

Plan for how you’re going to use your extra cash

Paying money into an IVA each month is necessary to help you get out from under your debt, but you know better than anyone how difficult it can be to live under such tight financial restrictions.

When your IVA ends, those restrictions will be lifted. You’ll be left with a good chunk of extra cash. While that’s great news for you, you also need to be wary of falling into the same old pre-IVA money habits. That’s why you should begin planning how you will use your extra IVA budget.

The good news is you’ve managed to survive without this money before; an IVA takes all of your income, minus essential expenses, towards your arrangement, so you should view your IVA money as a bonus and make sure you only use it for the things that are in your financial best interest – saving for a home, investing for your future, or taking an important step in life.

Begin rebuilding your credit score

If credit cards and payday loans left you with crippling debt in the first place, it’s possible you’ve now sworn off new lines of credit and have vowed you will never take on debt once you’re finished with your IVA.

While it’s easy to understand why people feel this way, it might not be the best route for you if you’re looking to rebuild your financial profile.

Some of the biggest events in our lives can only be achieved by taking on new credit – think buying a new home, funding an education, or being able to afford your dream wedding. And if you’re to be accepted for this kind of credit, you’re going to have to rebuild your credit score.

Am I able to access new credit during my arrangement?

Thu, 30 Mar 2023 07:30:48 GMT

If you’re currently in an Individual Voluntary Arrangement, it can be more difficult to access credit.

An IVA requires you to focus most of their income on payments towards your debt, meaning it can limit your ability to borrow. In this article, we look at what credit is, common examples of credit, and how an IVA might impact your ability to access it.

What is credit?

Credit is the ability to borrow from a lender, company, or individual, and pay the money back later. The lenders, companies, or individuals you borrow from are referred to as creditors, and you will be able to get credit so long as you agree to repay creditors on their terms – which usually means with interest and charges added.

Your ability to get credit is determined by your credit score – a three-digit rating that demonstrates your creditworthiness. The higher your score is, the higher the likelihood of lenders accepting you in the future, whether it’s for credit cards, payday loans, or other financial services.

You can check your credit score via credit reference agencies – independent bodies authorised and regulated by the Financial Conduct Authority (FCA) .

What are some common examples of credit?

Any situation where people borrow funds for goods and services, and come to an agreement with the provider to repay the debt later, can be considered taking out credit.

Borrowing money in this way is common-place, so there is a good chance you have taken credit from a company or provider already. Some of the most common forms include:

Consumer credit (Like credit cards, or other any personal debt taken on)
Mortgages
Bank loans
Car finance

The above examples fall into the category of ‘good credit’ – where you need to take on new credit in order to generate the money you need to move forward in life.

But it’s important to remember it’s still debt – take on too much and you can fall behind with payment, hurt your credit score, and find yourself turning to debt solutions like IVAs.

Can you get credit while in an IVA?

Yes, but it’s complicated. You can borrow money during an IVA, but if you want to borrow more than £500 you must make sure to ask permission from your Insolvency Practitioner (IP) – a debt professional, often appointed by the Insolvency Service, who will handle your debt arrangement.

If you apply for more than £500 without your IP’s permission, you will breach the terms of your IVA, and it might fail. If your IVA fails, you will need to find alternative solutions to repaying your debts, as the debts you carried into the agreement will remain unpaid.

If you need to borrow during the course of an IVA, seek debt advice first – juggling IVA payment and new debt can leave people in financial difficulty, leave a black mark on their credit report, and even lead to insolvency.

How do I get further credit during an IVA?

You can’t reach out to a lender without the permission of your Insolvency Practitioner. When your IP is considering whether to grant you permission to obtain credit, they will consider factors like:

Whether it’s necessary
How long it will take you to repay
Whether you can repay the provider on top of your current IVA payments

If you fail to get in touch with your IP first, you may breach the terms of your IVA and have to arrange a new debt repayment method.

Find a lender

Even if your IP approves, you might struggle to find a credit provider. The details of your IVA are public – they will be recorded on both the Individual Insolvency Register and your credit report.

Potential creditors can use Experian, or another body approved by the Financial Conduct Authority, to search your financial history. If you have a low credit score, they may either refuse you, or offer you higher interest rates that threaten to increase your debts further.

Can I borrow money to make my IVA payments?

If you feel that you must resort to credit to cover day-to-day costs during the course of your IVA, it is a better idea to get in touch with your IP instead of accessing further credit. You could try:

Adjusting your budget

It could be that your proposed budget isn’t working, and you may be able to lower your monthly payments.

Asking for a payment holiday

IVAs do allow some flexibility, and you may be able to skip payments for a month or two. When this happens, the payments are simply added to the end of your IVA plan, making it last a little longer.

Can I get a loan to pay off an Individual Voluntary Arrangement?

Many people use a lump sum to settle their IVA early, but not everyone has that kind of money to hand. That’s why people are sometimes interested in the idea of taking a loan to pay off their IVA.

Being accepted for a loan during your IVA will be difficult, but it’s not impossible. There are companies out there, like Sprout Loans, for example, who specialise in IVA early settlement loans.

The allure of these loans is that they shorten the term of your IVA, but they often charge higher interest, and can cause serious money issues for those who struggle to repay.

You should research any IVA settlement loan company thoroughly before making a decision – either through their website or reviews. You will also need to get your Insolvency Practitioner’s approval to go ahead, be at least halfway through your IVA, and be up to date with payment.

Can I get a credit card with an IVA?

As with any other form of credit, getting a credit card is more difficult if you have an IVA – but not impossible.

Lenders may not be willing to offer you their best rates, while some may reject you outright, but the ability for IVA holders to access a credit card has increased over the years.

That being said, you will need permission from your IP to make the application, and if you can afford to, it’s best not to take out extra credit during the course of your debt repayment plan.

How does an IVA impact your credit rating?

It stays on your credit file

A record of your IVA will remain on your credit file for six years from its start date. This means that, in a standard 60 month IVA, it will drop off your credit file about a year after you make your final payment.

You will need to rebuild your credit score

It is a good idea to request a certificate of completion when you finish your IVA, to provide proof that you satisfied its terms. You can then share the certificate with Experian and the other reference agencies, as well as future lenders.

Can I get finance after an IVA?

Because of the negative impact an IVA can have on your credit score, it can be difficult to get credit even after it’s finished, so you should wait until the IVA has dropped off your credit file before applying if you can.

You can begin to repay your credit by ensuring bills are paid on time and considering a credit-building card. If you need to borrow sooner, approach a credit union rather than high street lenders. Credit unions can also be a better source of credit during the course of your IVA.

How does an IVA affect your life?

An IVA is a big commitment. In the short term, it will involve you limiting your spending in order to focus on debt repayment.

In the longer term, having an IVA will leave a mark on your credit profile, and you may experience difficulty accessing new forms of credit – for mortgages, loans, or credit cards – for a few years afterwards.

Despite that, the positives outweigh the negatives. Your IVA will allow you to settle your debts, write off the debts you can’t afford, and look forward to a future free of money worries.

What happens if my expenditure goes up during my IVA?

Thu, 30 Mar 2023 07:19:43 GMT

The amount you pay in monthly contributions to your IVA was worked out based on your affordability, but what if that affordability changes? What happens if your monthly expenditure goes up, making it harder for you to make your IVA payments?

In this guide we explore what happens if your outgoings increase during your IVA, including why your expenditure might increase, whether an increase can result in IVA failure, and what you should do if you experience an expenditure increase during your arrangement.

Is it common for expenditure to increase during an IVA?

An IVA typically lasts for five or six years, and can occasionally last even longer. You can expect a lot of things to change during a five-year period, and your financial circumstances are no different.

Your IVA proposal is put together based on your affordability, which is calculated by taking into account your income and expenditure, and basing your monthly contributions on how much disposable income you have left at the end of the month.

Most of the outgoings that are taken into consideration will be for fixed amounts of money, with expenses like your mortgage or rent payment, insurance, and household bills unlikely to change too much over that period.

That said, even fixed bills might be increased by your supplier, and other expenses – from the amount you spend on food, to the cost of filling up your car – can easily fluctuate over five or six years. That’s when your IVA agreement may have to be examined.

What happens if my outgoings increase during my IVA?

As previously stated, it’s likely your outgoings will increase in one way or another during the course of your IVA. That’s not a problem as long as those increases are highlighted and taken into account with regards to your arrangement.

Small increases in expenditure

Small increases in expenditure are to be expected during your arrangement. Inflation can lead to the price of goods increasing over five years, and if the price of goods increases, your cost of living will increase as well, making meeting your monthly contributions more challenging.

The annual review process should be able to take care of most of the smaller increases you experience. Every year of your IVA we will run through your arrangement with you, consider your income and expenditure, and make sure the arrangement is still fit for purpose.

If we discover during your annual review that an increase in your outgoings has resulted in you struggling to meet your monthly contributions, we may decide to adjust those contributions going forward.

Major increases in expenditure

We understand that unexpected expenses crop up from time to time, and something might happen during your IVA term that qualifies as a financial emergency.

If your boiler breaks down, or your work van needs a new exhaust, you may find expenditure shoots up rapidly, and begin to worry you will no longer be able to make your next IVA contribution.

If that happens, it’s important you get in touch with us immediately. If it’s a one-off expense like a boiler breakdown, we may be able to give you an IVA payment break which would allow you to defer monthly contributions until the one-off expense is paid.

If you experience a major increase in your expenditure that becomes a recurring issue, i.e. a big increase on your rent or mortgage payment, then we may need to explore whether your arrangement needs to be adapted.

Can an increase in expenditure result in an IVA failing?

There are some cases where a major increase in your expenditure, or a severe cut in your income, makes keeping up with a monthly IVA payment completely unsustainable.

If you continually fail to make your IVA payments, your IVA will eventually fail. When your IVA fails the arrangement will end, meaning you won’t have to continue making payments.

That said, the money you originally owed still stands. Your creditors will be owed the remaining balance of the debts included in the IVA, and it’s your responsibility to arrange further payments towards your total debts if you want to avoid bankruptcy.

If you are unable to come to an arrangement with your creditors, they may find you in breach of your legally-binding agreement and apply to have you made bankrupt in order to recover some of the money you owe.

What should I do if my expenditure increases during my IVA?

While there are any number of reasons why your expenditure might increase during your IVA, there’s only one course of action you need to take if it happens to you: Get in touch with us.

The sooner we know that you’re struggling to meet your financial commitments, the sooner we can take action and find a solution that suits everyone, whether that’s offering you an IVA payment break or adapting your arrangement to fit your circumstances.

What do I do if creditors are still contacting me during my IVA?

Thu, 30 Mar 2023 07:15:55 GMT

An Individual Voluntary Arrangement (IVA) is a legally binding agreement between you and the people you owe money to, also known as your creditors.

By entering an IVA you agree to pay back all, or a percentage of your debts, over a period of time at an affordable rate.

Creditors included in the arrangement are bound to terms and conditions preventing them from:

Chasing for debts covered by the IVA
Contacting you directly about the IVA or the debts included in it
Adding interest or charges to the debts included in the IVA

That means the people and companies you owe money to are not allowed to contact you and instead should speak directly with the insolvency practitioner (IP) who is managing your arrangement.

You should inform your IP straight away about any letters or calls from creditors or debt collectors included in your arrangement and ask your IP to speak with them on your behalf.

If a creditor or debt collector calls about a debt included in the IVA you should kindly ask them to discuss the matter with your IP and give them the contact details.

What if the creditor isn’t included in the IVA?

If creditors contact you and they aren’t included in the IVA your next steps are determined by a few different factors.

If you forgot to list the creditor when setting up your IVA then the creditor will still be bound by the terms of the arrangement. You should explain the situation to your IP who can use the money you pay into the IVA to pay this creditor as well and advise the creditor in question to speak with your IP directly.

If the creditor isn’t listed in the IVA because the type of debt can’t be included in the arrangement or the debt is for mortgage arrears, you will need to deal with this separately from the IVA. These creditors are still permitted to chase for repayment.

You should speak with your IP for further advice if you’re unsure if the creditor is included or not.

Will my inheritance be included in my IVA?

Thu, 30 Mar 2023 07:13:12 GMT

If you enter an IVA you agree to repay your unsecured debt over five years.

During this time you may find yourself in receipt of an inheritance. This is when you are gifted another person’s money or assets when they pass away.

If you receive an inheritance you will be made aware of exactly how much has been left to you by a solicitor. This could be a percentage of a property or a specific sum of money.

Inheritance can have an impact on your IVA so it’s important to be aware of how this could affect you.

Will inheritance affect my IVA?

If you receive an inheritance, whether an amount of cash or a share of an asset, you will be expected to contribute this to your IVA.

Most IVAs contain a windfall clause that states if you receive any unexpected or unplanned income, such as inheritance, that it should be used to repay your creditors.

The reason for using any unexpected income to repay your lenders is that the IVA is designed to save you from bankruptcy and clear a percentage of your debts. By signing you agree to pay your creditors less per month they would be entitled to and as such should offer any additional money to the arrangement when possible.

How much of my inheritance will I pay into my IVA?

By entering an IVA you agree to repay your debts as best you can over a set period with the remaining debt written off at the end of your arrangement.

However, while you may not be committed to repaying the full balance of the debt owed you are agreeing to repay as much as you can towards it. That means that any inheritance you receive should go towards your arrangement.

If your inheritance can cover the entirety of your IVA debts you’ll be expected to pay this in full as well as cover the cost of any fees associated with the arrangement.

You’ll be able to keep any money you have left over after paying the IVA.

Will I be able to keep any of my inheritance?

While it may not be the first thing on your mind, it’s important to speak with your insolvency practitioner (IP) before spending any of your inheritance.

You can typically keep up to £500 of any inheritance you receive but anything above this must be introduced into the arrangement.

If you are planning to make an emergency purchase, such as a car that will get you to work or home repairs, you may be permitted to keep more of the funds.

You should speak with your IVA provider about any special circumstances as soon as possible.

What happens if I don’t inform my IP about my inheritance?

When you sign your IVA proposal you agree to make your IP aware of any changes in your financial circumstances.

As well as completing an annual income and expenditure check you are expected to keep your IVA provider up to date with any changes to your financial circumstances – good or bad.

Choosing to keep news of your inheritance a secret would be considered a breach of your agreement and your IVA could fail.

What if I receive an inheritance before starting an IVA?

If you receive an inheritance, or any windfall, before entering an IVA, your creditors may request any remaining funds are paid into your agreement.

Creditors might also reject your IVA application if you have spent funds from an inheritance or windfall before entering the arrangement if they feel this money should have been paid towards the debt you owe.

You may choose to pay your creditors as much as you can from a windfall before entering into an IVA as this may work out better for you financially in the long term.

Your experienced debt adviser will be able to advise on the best way to proceed during your application process.

Common questions when you’re halfway through your IVA

Thu, 30 Mar 2023 07:09:14 GMT

Now that you’ve reached the halfway point in your IVA, the one thing you’re probably wondering is how much money you have left to pay into your arrangement.

That’s totally understandable. An IVA is a financial journey and now you’re halfway down the road, you want to know how much further you have to go.

While you’re probably looking for an exact figure, unfortunately we can’t give you one. That’s because everybody’s IVA (and their level of IVA payments) is dependent on their financial circumstances, and circumstances change. The figure we give you today might have changed by tomorrow.

So while we can’t tell you exactly how much money you have to pay into your arrangement, what we can do is give you answers to some common questions we get from clients at this stage of their IVA journey.

How much longer will my IVA last?

The amount of time between your first payment and receiving your completion certificate depends largely on how well you keep up with your monthly contributions, though there are certain instances where creditors can request an extension.

All that being said, most IVAs are advertised as taking 60 months (or five years) to complete. Whether it takes you more or less than the 5 years set out depends on whether you fall behind with payments, or you find yourself able to pay up your IVA early.

Is it possible my IVA will last longer than five years?

If you own a property, it can have an effect on the length of your IVA. As a homeowner, you may be required to remortgage your property to increase the amount you pay towards your IVA. This depends on how much equity is in your home.

If a valuation shows that there is more than £5,000 of equity in the property, you will normally be required to release that equity towards your IVA. This usually happens in year 5 of your arrangement.

If your home cannot be remortgaged, however, you will be required to make monthly contributions for an extra 12 months. This means the IVA would last six years rather than the usual five.

What can I look forward to once my IVA is over?

There are so many things we could mention that they wouldn’t fit on a single page, but off the top of our heads:

Making your own decisions about how to spend your money
Not having to budget (so strictly)
Being able to borrow money (responsibly)
Buying a house
Building up your savings
Getting your life back

We’ve helped coach thousands upon thousands of clients through their IVAs, so take it from us when we say that life after debt lives up to the hype.

What would you say to someone at this stage in their IVA journey?

First of all we’d say “WELL DONE!!!” If you haven’t heard it elsewhere already, you’ve achieved something really special by getting this far. Living with debt is hard, and IVA offers a solution to your debt problems, but that doesn’t mean it’s easy to live under financial constraints – so well done for making it this far.

Next, we’d say “Keep going!” We know the last few years have been difficult, and there will be challenges to come, but we hope you’re starting to see some light at the tunnel. Focus on that and whenever you’re struggling, just picture the day when you’re finally free of debt and ready to get back to a life free of money worries.

Will my IVA be worth it?

Living with an IVA is challenging, and at Parkfield we don’t try to pretend otherwise. While you chose to enter an IVA as a necessary way of dealing with spiraling debts, we understand that nobody would choose to put themselves through this kind of arrangement if they didn’t have to.

That being said, IVAs really are life-changing for so many of our clients. They learn skills they can take with them, like how to maintain a strict budget. More importantly, they learn how easy it is to get into serious debt, and how challenging it can be to get back out of it.

Although you might struggle at times during your IVA journey, it’s always with a greater goal in mind – looking forward to life after debt.

So will your IVA be worth it? Absolutely.

Can my IVA fail?

richard@clarityds.co.uk (Richard Dunham) — Thu, 30 Mar 2023 07:04:08 GMT

Now that you have entered your IVA, you should be feeling more confident about your financial future. However, it’s important to be aware that there are certain circumstances that can cause your IVA to fail.

While IVA failure is very rare, having all the information available to you means you’ll know the warning signs to look out for.

In this guide we’ll explore IVA failure, including what might result in your IVA failing, what happens if your IVA has failed, and what you should do next if the worst happens.

Why might an IVA fail?

An IVA is a legally-binding debt management plan which enters you into a binding contract with your creditors. Any IVA failure is likely to come from failure to live up to your contract. Put simply, an IVA fails if you do not stick to the IVA terms.

The most likely reasons for an IVA failing include: Not keeping up with payments and failing to inform your Insolvency Practitioner (the IVA supervisor who manages your agreement); Changes in financial circumstances where your creditors refuse to accept lower payments; Accessing further credit without the Insolvency Practitioner’s permission; lying on your IVA application; or the death of the debtor.

Each of the above scenarios represents a breach of contract between you, your creditors, and your IVA provider, and would result in your IVA failing.

What happens once my IVA fails?

Failure report

If your IVA fails, the first thing that will happen next is your Insolvency Practitioner (IP) will send you a letter of termination and a failure report. The failure report includes all the details of your failed IVA, including:

Creditor details
How much each of your creditors have been paid via monthly payments
The reason why the IVA failed
IVA fees

Once your IVA fails the arrangement will end, meaning you won’t have to continue making payments to your IVA provider or your Insolvency Practitioner.

Possible bankruptcy

Because an IVA is a legally-binding agreement, it offers you protection from creditors harassing you for payments. When IVAs fail, that protection no longer exists.

Creditors can resume contacting you, and even have the power to make you bankrupt straight away because you breached the agreement.

Your IP, empowered by the Insolvency Practitioners Association (IPA), also has the ability to make you bankrupt in this instance. Bankruptcy is usually a last resort for problem debt, but it can be a relatively quick way to get a fresh start.

How do I prevent my IVA from failing?

An IVA is a legal agreement. Your creditors have to stick to the rules, and you do too. If you don’t meet your payments or other obligations listed in your IVA it could fail.

When your Insolvency Practitioner set up the arrangement, they assessed your eligibility based on your financial circumstances, including your level of unsecured debt, and whether you have the level of income required to cover the costs involved.

If your circumstances change during the course of the IVA and you’re worried you’ll struggle to afford payments, you should contact your IP immediately. They can come up with a proposal for reduced payments based on what you can afford.

While your creditors are not obliged to accept that proposal, it’s better to make an effort to stick to the arrangement rather than breaching your IVA and having it fail instantly.

Is an IVA breach the same as an IVA failing?

A breach notice can be issued for not doing what was agreed in your IVA proposal, but it won’t necessarily result in your IVA failing.

If you breach your IVA, you will be issued with a breach notice stating how you’ve broken the terms of your IVA. Things that are considered an IVA breach include:

Not providing the necessary information for your annual IVA review
Selling your assets and failing to funnel the proceeds into your arrangement
Missing payments towards your IVA (up to three months’ arrears)
Refusing to comply with orders from your Insolvency Practitioner (within reason)
Earning additional income and not paying a portion to your creditors

Any one of these IVA breaches may eventually result in a failed IVA, but you’ll be given time to make amends for the breach in question first.

The breach notice will give you a precise explanation of what you’ve done wrong, as well as a timeframe for correcting your mistake. As long as you take the necessary steps to resolve the matter within that time frame, you should be able to get your IVA back on track.

Will I be eligible for another debt solution after a failed IVA?

If a change in your financial circumstances results in your IVA failing, don’t panic. We may be able to find you a more suitable debt solution. Below are some options that may be available to you.

Debt Management Plan (DMP)

A Debt Management Plan is an agreement, negotiated by you or a third party, to lower your monthly payments to your creditors.

Unlike an IVA, a DMP isn’t legally binding and there is no debt write off involved, but you will be able to repay your creditors over time based on monthly payments you can reasonably afford.

Debt Relief Order (DRO)

A Debt Relief Order (DRO) is an agreement designed to help people with little to no spare income, who don’t own their home, and have debt of £20,000 or less, pay it back over time.

Set up through a DRO advisor and the Insolvency Service, a Debt Relief Order allows payments to be paused on the debts you owe for a period of 12 months. Once you’re in a DRO, your creditors can’t force you to make any payments, and they can’t actively pursue you for your debts.

Bankruptcy

An Insolvency Practitioner can ask court to make you bankrupt if your IVA fails. If you have a low income and don’t own a home, this may be a good solution, allowing you to get rid of your debts and make a financial fresh start.

It’s also possible for you to petition for your own bankruptcy if you feel you have no other way to deal with your debts, although you should consider your options carefully before agreeing to anything.

Alternatively, your creditors may try and make you bankrupt for breaching your IVA terms. If you want to avoid bankruptcy you should try to come to an agreement with them separately about how you will repay the debt you owe.

Will people find out about my IVA?

Thu, 30 Mar 2023 06:59:21 GMT

One of the most common concerns those in an IVA have is that other people will find out they’re in a debt arrangement, because information about IVAs is publicly accessible.

Every new debt arrangement in the UK is entered into a database. For Scotland, it’s the Register of Insolvencies. In Northern Ireland, IVAs are recorded on a separate Individual Voluntary Arrangement Register. And in England and Wales, it’s the Individual Insolvency Register

In this guide, we’ll explore the Individual Insolvency Register in more detail, including how it works, how long your details will be held, and how likely it is that other people will find out about your IVA.

What is the Individual Insolvency Register?

The Individual Insolvency Register (IIR) is a publicly searchable database containing records of individual insolvencies – bankruptcies, Debt Relief Orders (DROs), and IVAs. The register can be accessed online and searched by name.

The insolvency register can be a useful source of information for employers, landlords, or credit reference agencies.

What Details Appear on the IVA insolvency register report?

The following details appear on the register:

Type of insolvency (ie bankruptcy, IVA, or DRO)
Full name and title
Occupation
Gender
Full address
Date of birth
Start and end date of the insolvency
The Insolvency Practitioner (IP) responsible for the case
IP’s contact details

If you think that having details of your address published on the IIR could put you in danger, you can appeal to have it removed, but this is uncommon.

According to the IIR’s website, these details, which might seem extensive, are provided to avoid people being confused with others, which is a particular issue when it comes to common surnames.

The Insolvency Service, which is responsible for the insolvency register, says that it must keep a record of insolvency details by law.

How long do Details appear on the IVA Insolvency Register?

How long these details appear on the insolvency register depends upon the type of insolvency. Bankruptcy details remain visible for the duration of the bankruptcy (usually around one year) plus three months. Details of IVAs appear on the register for the duration of the plan – until you are discharged.

Despite this, going through insolvency can have a much more far-reaching effect on your credit score. An entire credit file contains information about a person’s credit record for the past six years, meaning that bankruptcies and IVAs remain on the file for this amount of time.

This can make accessing credit more of a challenge even though your former debts have been settled.

Who is likely to find out about my IVA?

While anybody can access the Individual Insolvency Register in theory, it’s not listed on search engines and people need to know the exact details they’re searching for. In practice, that means the people most likely to know about your IVA are employers, landlords, and future lenders.

Employers

Employers might use the insolvency register to ensure that an employee or candidate is legally allowed to work in their chosen field, since access to certain occupations is restricted to people who have experienced insolvency.

Landlords

Landlords might search the insolvency register to see whether potential tenants have had trouble paying debts in the past. This could be a useful indicator of how likely they are to manage monthly rent payments. If a potential tenant has been insolvent in the past, the landlord might decide to ask for advance payment, or for the tenant to have a guarantor for example.

Future lenders

Because credit reference agencies have access to the insolvency register, having an IVA will have an impact on your credit score, hence your access to further credit. If credit reference agencies see that you have had trouble repaying your debts in the past, they are likely to reduce your score, which can make borrowing more challenging.

With any debt solution, though, you can rebuild your credit score over time, and worrying about your credit score should not put you off seeking help with your debts.

How can I rebuild my credit after my IVA?

Fortunately, there are steps you can take to rebuild your credit once you have been discharged from insolvency:

Ensure that once you have completed your IVA or bankruptcy, you receive a completion certificate – just in case you need to prove your discharge
Request a copy of your credit file (from Experian, Equifax, or Callcredit) and ensure that all the details are correct. Incorrect details could drag your score down
Take on a credit card. It might seem risky, but using credit is the single best way to show lenders that you can do so responsibly. Make sure to use it sparingly at first, and pay your bill in full every month. Credit cards are one of the easiest forms of credit to be approved for following an IVA or bankruptcy

What happens if I miss an IVA payment?

Thu, 30 Mar 2023 06:55:05 GMT

One of the most common questions we get from clients who have entered an IVA is what happens if they miss a payment, and what they can do to get their arrangement back on track once they find themselves in that position.

In this guide we’ll explore missed IVA payments, including common reasons for missing IVA payments, what you should do if you miss a payment, and what will happen if you continually fail to make payments towards your arrangement.

What are common reasons for missing IVA payments?

Even if you have completed an income and expenditure check and have agreed to make a certain level of contribution to your IVA each month, we understand financial emergencies happen.

Occasionally events outside your control can cause you to fail to make your IVA payments on time. Common reasons for people missing IVA payments might include:

Being paid late by your employers
Encountering a problem with your bank
A financial emergency like a boiler breakdown or urgent dental treatment

While you may have a very good reason for missing an IVA payment, it’s important to remember that your IVA is a legally-binding arrangement and failing to make your payments on time means you aren’t living up to your end of the bargain.

It could eventually result in IVA failure.

What do I do if I miss an IVA payment?

Missing an IVA payment is a breach of your agreement. If you realise you have missed an IVA payment, or think you’re in danger of missing IVA payments in future, it’s important that you take action right away.

Contact us

The first thing you should do when you miss an IVA payment is get in touch with the team at Creditfix. You can contact us 0800 047 8826 .

Once you get in touch, we’ll pass you over to our arrears team. They handle all IVA arrears and will be able to help you get back on track by making a late payment, or get in touch with your Insolvency Practitioner to discuss your options.

Make a late payment

When you get in touch with us and are passed to the arrears team, we will need to know why you missed your last IVA Payment.

As long as you have a good reason for the delay, and are happy to make up for the payment you missed, we may be able to arrange for you to make a late payment. Late payments will be handled on a case-by-case basis.

Receiving a notice of breach

Anybody who misses an IVA payment is likely to receive a notice of breach from their Insolvency Practitioner. This is a document which outlines the way in which you have breached the terms of your arrangement.

The breach notice will give you a detailed explanation of what you’ve done wrong, in this case missing an IVA payment, as well as steps to put it right, i.e. by making a late payment to settle your arrears.

As long as you take the necessary steps to resolve the matter within the time frame set out in your breach notice, you should be able to get your IVA back on track.

What happens if I don’t repay a missed payment?

There are three possible scenarios for a client who continually fails to meet their IVA payments, ending with possible bankruptcy.

Changing the terms of your IVA

If your financial circumstances have changed and you no longer think you will be able to keep up with your IVA payments, it may be possible for us to work with your Insolvency Practitioner to change the terms of your arrangement and lower your monthly contributions.

IVA failure

If you continually fail to make your IVA payments, your IVA will eventually fail. When your IVA fails the arrangement will end, meaning you won’t have to continue making payments.

Bankruptcy

Because an IVA is a legally-binding agreement, it offers you protection from creditors harassing you for payments. When IVAs fail, that protection no longer exists.

Creditors can resume contacting you, and even have the power to make you bankrupt straight away because you breached the agreement. Your IP also has the ability to make you bankrupt in this instance.

What is an IVA payment break?

Wed, 29 Mar 2023 15:13:08 GMT

While entering an IVA means you’re committing to maintaining regular monthly contributions towards your debts, it is possible in certain circumstances to request a payment break.

In this guide we’ll examine IVA payment breaks in more detail, including what they are, how you ask for one, and what evidence you’ll need to support your payment break request.

What is an IVA payment break?

An IVA payment break is a temporary pause in the monthly contributions to your IVA, which can be processed without the need for creditor approval.

A payment break has to be requested by the debtor (you) and permission for the payment break is at the sole discretion of your IVA provider (Parkfield Insolvency).

The idea behind a payment break is to help you deal with a change in your financial circumstances during the course of your IVA.

As long as you can prove your financial circumstances have materially changed, and this change is having an impact on your ability to meet your contributions, we will consider the evidence and may be able to grant you a payment break.

When should I ask for an IVA payment break?

We understand that your circumstances may change during the course of your IVA, and if you fall into financial difficulty you may struggle to keep up with your monthly contributions.

If you find yourself in that situation, you may be able to request a payment break, however they’re not suitable for every scenario.

If you’ve already missed a payment

Missing an IVA payment is a breach of your arrangement, and may leave you at risk of IVA failure. If you’ve already missed an IVA payment, get in touch with us straight away and we’ll take it from there.

If you’re experiencing temporary money issues

If you’re in short-term financial trouble that’s causing you to struggle with your payments, it may be possible for us to grant you an IVA payment break in order to give you the breathing space you need to deal with your money issues.

Will I need evidence to support my payment break request?

Yes. While we know that financial emergencies happen, we will still need to see any evidence you can provide to support the fact that you are unable to meet your IVA payments.

If your car breaks down and you have to pay to have it fixed, make sure to keep the receipt
If you’re having problems with your bank account and it’s preventing us from taking payments, request a letter from your bank to confirm this

The more evidence you can provide us with, the stronger the case you’ll have, and the more likely you’ll be to be granted a payment break until you get back on your feet.

How long will my IVA payment break last?

Under the revised IVA protocol from the 1st of October 2016, there are different limits on the length of an IVA payment break, depending on when your IVA started.

If you entered an IVA before October 2016 you could be entitled to an IVA payment break of up to 6 months
If you entered an IVA after October 2016 you could be entitled to an IVA payment break of up to 9 months

Much like the decision to grant the payment break, the exact length of the payment break will need to be agreed with Parkfield Insolvency.

Once we’ve settled on an agreed payment break term, your IVA will then be extended by the same length of time. So if you take a payment break of 4 months, your IVA will be extended by 4 months.

What if I’m having long-term financial issues?

If you find yourself experiencing serious money issues during your IVA, and those issues are unlikely to be resolved any time soon, a payment break is unlikely to help.

You would be better served taking one of the following courses of action:

Reducing your monthly IVA payments

At Parkfield Insolvency, we will never force a client to make IVA payments they can’t afford. Your IVA payments are based entirely on your affordability. That means if your income changes, your arrangement should change in line with it.

If you experience a change in your circumstances, it’s important you get in touch with us to let us know. We will then work with your Insolvency Practitioner to recalculate your income and expenditure in order to make your monthly contributions affordable.

Ending your IVA early

If you find yourself in the situation where you’re unlikely to be able to afford your IVA contributions, even in the event of a payment reduction, it is possible to end your IVA early.

Similar to requesting an IVA payment break, we would expect you to give a good reason for being unable to manage your IVA, for example a disability or serious illness. and to be able to provide strong evidence supporting it.

We will then take that evidence to your creditors and present your case. If they agree that you qualify for early termination, your IVA will end and your remaining debt will be written off, leaving you free of any debt that was included in your arrangement.

How do you catch up on IVA arrears?

Wed, 29 Mar 2023 15:06:55 GMT

By taking on an IVA, you’re entering into a legally-binding agreement with your creditors to make regular payments towards your debts. One of the most common ways that agreement can be put in jeopardy is IVA arrears.

In this guide, we’ll explain IVA arrears in-depth, including what they are, how people fall into IVA arrears, what you should do if you want to catch up with your IVA arrears, and what could happen if you don’t.

What are IVA arrears?

Much like if you were to miss a mortgage or rent payment and fall into arrears, IVA arrears is the name given to the situation where a client fails to make one or more monthly payments to their Individual Voluntary Arrangement.

Falling into arrears can put you at risk of breaching the agreement you signed up to with your creditors, which is why at Parkfield Insolvency we like to give clients as much leeway as possible to catch up with missed payments and get their IVA back on track.

How do people fall into IVA arrears?

Arrears can be a sensitive issue. Although your creditors understandably expect you to make your IVA payments on time, you may have had a perfectly good reason for missing your last IVA payment.

In our experience, reasons for missing an IVA payment often include:

Poor mental health
A family bereavement
Problems with your bank
Being paid late by an employer

While your reason for falling into arrears will of course be taken into account, missing IVA payments can quickly become a problem.

No matter how it is that you fall into IVA arrears, what’s most important is that you move on from your missed payment and work with us to help get your arrangement back on track.

Who deals with IVA arrears at Parkfield Insolvency?

We have a dedicated arrears team here at Parkfield whose job it is to work with clients who, for one reason or another, have failed to meet the obligations they signed up to as part of their IVA.

We understand that falling into arrears is a delicate situation, not just for the success of your arrangement, but also for you personally.

That’s why our arrears team have the experience, training, and sensitivity necessary to get to the heart of your situation and help you plan a way forward.

What should I do if I fall into IVA arrears?

Contact us

The first thing you should do when you miss an IVA payment is get in touch with the team at Parkfield.

Make a late payment

When you get in touch with us and are passed to the arrears team, we will need to know why you missed your last IVA Payment.

Receiving a notice of breach

As long as you take the necessary steps to resolve the matter within the time frame set out in your breach notice, you should be able to get your IVA back on track.

What happens if I don’t catch up with my IVA arrears?

You will be presented with two main options if you fail to catch up with your IVA arrears:

Adapting your IVA to fit your circumstances
IVA failure and likely bankruptcy

If you continually fail to make your IVA payments, it may be the case that your payment level is too high. It might be possible to lower the level of your monthly contributions, subject to an income and expenditure check.

Beyond that, continually missing payments will result in IVA failure. Your agreement will be terminated, and we will send you a notice of termination outlining why.

Once your IVA fails, your creditors will be able to get back in touch with you to chase you for payments, and are also within their rights to appeal to the court to make you bankrupt in order to recover some of the money you owe.

What if I want to terminate my IVA after falling into arrears?

You don’t have to continue with your Individual Voluntary Arrangement if you fall into arrears. After missing a number of IVA payments, you may decide you can’t foresee a situation where you would be able to continually meet your monthly contributions.

In that scenario, it’s possible for you to reach out to your IVA supervisor – in this instance, Parkfield Insolvency – and request that your IVA be terminated. For your request to be official, you should send it in writing, and include any relevant information regarding the reason for the termination.

Even if you do terminate your IVA, however, it may take several months for it to be removed from the IVA register, and details of the arrangement will remain on your credit file for six years from its official start date.

More importantly, you will still have to pay your outstanding debts to creditors, and will no longer receive the creditor protection your IVA offered. That means not only will you have to pay back your remaining debt, creditors may backdate fees and charges on top of that debt.

When do I make my first IVA payment?

Wed, 29 Mar 2023 14:57:14 GMT

Now that you have completed the IVA application process and had your arrangement confirmed, it’s understandable if your thoughts turn to the most important thing – when IVA payments will start coming out of your bank account.

In this guide, we’ll examine IVA payments, including how your payments are taken, when your first payment will come off, and whether your IVA payments will change during the course of your arrangement.

How are my IVA payments taken?

We use the Recurring Card Payment (RCP) method to collect your payments each month/week. We store your debit card details into our system and a card payment will be taken for your contribution on its due date, much like how you pay for your Netflix each month.

It’s important to note that we can also take manual payments over the phone, or online. If you are in need for a payment to be made, we can set this to be taken automatically for you, even if it’s a one off.

When will my first IVA payment come off?

You would have gone through a verification call early in your application process where you spoke with an adviser and talked them through your personal and financial circumstances.

Your first IVA payment will be scheduled to come off within 30 days of your verification call, and will fall on the same day each month.

How much will my first IVA payment be?

How much your first IVA payment is depends entirely on your circumstances – the size of the monthly contribution is based on how much you can afford to pay.

If you’re just about to make your first contribution, you will already have gone through an expenditure check. This takes into account your total income and outgoings, which are then used to calculate your disposable income.

Your monthly contribution will be based on your disposable income. Whatever money you have left at the end of the month after essential costs will go towards your arrangement. This figure will already have been worked out for you, and should be included in your IVA proposal.

When do you start paying my creditors?

When you make a payment towards your IVA, we will deduct a portion of that payment as an administration fee and divide the rest between your creditors. These payments to your creditors are known as dividends.

As per your proposal, we’ll make the first dividend payment to your creditors within 90 days of the commencement of your IVA, or within 30 days of when we receive your third IVA payment, whichever comes later.

The only exception to this is if any of the creditors named in your IVA are having trouble with their payment method or haven’t yet submitted BACS details, in which case payment might be delayed until those issues are resolved.

Can my IVA payments change during my arrangement?

We understand that a person’s situation is not going to stay the same for five years, and if your situation changes during your arrangement, your IVA payments may change as well.

If your circumstances change whilst you are in your IVA, it’s very important to notify us. IVAs are based on your affordability, and we will never ask you to make payments you can’t afford.

We can review your finances and adjust your case to suit, re-calculating your income and expenditure in order to make your payments affordable.

If it is a temporary change, you also have the option to request a break from your payments until it is resolved. However, if you choose to go down this route, we will require evidence of the reason you are unable to pay.

What can I expect from Parkfield during my IVA?

Wed, 29 Mar 2023 14:52:27 GMT

Making the decision to enter any debt solution is a long-term commitment.

When you enter into an Individual Voluntary Arrangement (IVA) you are signing up to a legally binding agreement that can last between five and six years.

While this may seem like a long time at first, this is your opportunity to change your financial future.

Expert Parkfield staff will be by your side every step of the way as you make your journey to a life free of unsecured debt but that doesn’t mean we’ll be in your ear constantly.

Part of the reason many people choose an IVA is the fact that it allows them the chance to live their life knowing their debt is being managed on their behalf.

That means we’ll only get in touch with you when we really need to.

Here we give an insight into how often we’ll be in touch during your arrangement with us.

Pre verification

When you first apply for debt help from Parkfield, we’ll get in touch straight away.

We understand that talking about debt and admitting there is a problem is hard, that’s why we don’t want you to wait for a minute longer than you need to when you ask for help.

At first, you’ll speak to an expert debt adviser who will get to know more about you, your circumstances and explain how we can help. They’ll run through your income and expenditure to make sure we find a solution that is suited to your affordability.

Next, we draft a proposal, detailing all of the debts you owe, and share this with the people you owe money to, also known as your creditors. The people and companies you owe money to will then vote on your proposal, deciding whether they agree to the repayment terms laid out in your IVA.

If 75% agree, you’re good to go and all we need next is one final signature to confirm your arrangement.

After approval

The initial signing process for your IVA shouldn’t take more than one or two days if you don’t have to change your bank account. If you do have to change your bank account upon entering an IVA, we can’t progress your application until that change is made, so the average lead time increases to around two weeks.

That said, the quicker you change your bank account, the quicker we can move the application forward.

During this time you’ll hear from us quite a lot as we prepare and draft your proposal, and have it sent to be approved by creditors.

It’s normal for you to hear from your creditors for up to 12 weeks after your arrangement is set up, and you will continue to receive annual statements from them, but once you’re in your IVA proper and have your payments set up, things begin to quieten down.

With your IVA in place we like to leave clients to get back to enjoying life, safe in the knowledge that their debt is being managed. That’s not to say that we leave you alone for the entirety of your arrangement.

We’ll get in touch once a year to conduct an annual review. This allows us to touch base and make sure your arrangement is still affordable. We’ll review your income and expenditure again, check in with how you’re coping, and adjust your arrangement where necessary.

We’re always here to help

While we may only get in touch with you once a year, or on the very rare occasion there’s an issue with you account, that doesn’t mean we aren’t here to support you.

If you’re worried about anything or have any questions, we’re just a phone call or a click away.

From helping you understand your proposal to changing your bank account at the very beginning of the journey to updating us about your circumstances or affordability later down the line, we’re always here to help.

You can contact us via email, telephone or live chat if you have any further questions.

How will my IVA impact my life?

Wed, 29 Mar 2023 14:48:11 GMT

Now that your IVA has begun, you will make one affordable monthly payment towards your debt each month for five to six years, with the remaining debt written off at the end of the agreement.

While it’s great that you have made the decision to deal with your debt, living with an IVA can be restricting. In this guide we’ll explore how an IVA may affect your life, including your monthly bills, your credit rating, and your ability to access new credit in the future.

How will an IVA impact my monthly bills?

Your eligibility for an IVA is always based on how much you can afford to pay towards your debt. An IVA consolidates all of your debt payments into one affordable amount, and given your case was approved, you have successfully demonstrated you can afford to make a monthly contribution.

When applying for the arrangement you would have taken part in an income and expenditure check. Your Insolvency Practitioner (IP) would have then used that information to determine how much you were capable of paying each month towards your debts.

When making that calculation, your IP would also have taken into account your monthly bills like rent, car payments, and other costs, as well as any additional debts that weren’t included in the arrangement.

This process should ensure your monthly bills remain manageable throughout the length of your arrangement, but if your bills increase or your circumstances change, making it more difficult for you to repay the debts that you owe, you should contact us immediately.

How will an IVA affect my credit rating?

Details of your proposal are put on your credit reference file, and also entered into the public Individual Insolvency Register for six years after approval, and as such, an Individual Voluntary Arrangement (IVA) will affect your credit rating.

The agreement will become part of your credit history and will remain on your credit file for six years.

However, it’s important to note that this is the case for most debt solutions and your credit score will likely already have been affected by being in debt in the first place.

Although an IVA does negatively affect your credit rating at first, it also offers the opportunity to start afresh, allowing you to stay on top of all future bills which will improve your credit rating.

How will an IVA impact my reputation?

Your IVA will be recorded in the Individual Insolvency Register which is available to the public.

Anyone who deliberately looks up your name in the register will see that you are insolvent but it won’t be broadcast in any other way.

So unless someone actually has cause to already believe you are in debt and checks the register, it is unlikely that anyone will ever know.

How will an IVA affect my ability to get loans in the future?

While repaying debt with an IVA, you must abide by strict rules when it comes to borrowing money such as loans or credit cards.

If you need to borrow less than £500, you can do so without asking permission from your Insolvency Practitioner (assuming the loan is approved by the lender). For amounts in excess of £500, you need to get written permission from your Insolvency Practitioner. The only exception is if the loan is needed to pay off utilities.

However, as the IVA affects your credit rating it’s always important to keep in mind that it’s unlikely you’ll be approved for short-term loans.

If this is a concern, remember an IVA consolidates your monthly bills and reduces the amount you owe so that you can actually keep up each month meaning you’re less likely to need a loan.

Can you lose your home with an IVA?

Homeowners looking for a debt solution may be a little concerned before entering an IVA for fear of losing their property.

It’s important to be aware that as a homeowner you won’t be forced to sell your home.

The value of your home will be taken into account as part of your agreement and you will be required to have your property valued in the final year of your IVA to determine how much equity is in it.

If your Insolvency Practitioner determines you have enough equity to significantly pay off your remaining debts, you will usually be ordered to remortgage to release that equity. If you cannot remortgage, you will simply be asked to make payments for an additional 12 months (making the IVA six years instead of five).

That said, you will have the option to sell the property if you choose. Any equity you do hold can be released into the arrangement, and you may even be able to keep some of the funds raised for yourself.

How will an IVA affect my car and other assets?

You will typically be allowed to keep your car provided that it is required for work or family transport and the value isn’t excessive.

With regards to other assets, you should note all household and domestic goods are excluded from the agreement by law. These are deemed as essential items and you will never be asked to sell these:

Electrical items such as computers, phones, televisions
Clothing
Furniture and fittings
Cooking equipment and white goods
Medical aids (e.g. mobility scooters and wheelchairs)
Children’s items
Books

How will an IVA affect my job?

For most people, entering an IVA will not affect your job, however, it’s important to be aware that the agreement can affect some types of employment.

If you work in the police or prison service, fire service, are a banking clerk or are in a position of financial responsibility, such as an accountant or solicitor, being in an IVA could impact your job, so always make sure to check your contract for restrictions.

If you are self-employed you can continue to operate your business whilst in the IVA but should be aware that ongoing credit with suppliers could become an issue.

How will an IVA impact my budget?

An IVA is designed to make managing your monthly budget much easier.

Put simply, your unsecured debts will now be consolidated into a single monthly payment, making your monthly debt repayments easier to manage.

This should then allow you to manage your remaining funds for current bills which cannot be included in the debt solution, and have money left over for other living expenses.

Most common ways an IVA may impact your life

While there are many benefits to an IVA, it’s important to be aware of all the ways your way of living may be impacted while you’re in the arrangement, and to plan around these possible effects.

Not all debts can be included. For example, student loans, child support and maintenance, magistrate court fines and social fund loans are excluded from an IVA, but an allowance can be given to enable you to continue repaying these.
Spending restrictions are put in place for the length of your agreement.
Homeowners may need to remortgage to release equity in the last year of the agreement. If you can’t remortgage, your arrangement could be extended by up to 12 months.
Any windfalls and inheritance money over £500 received during the term will be included in the arrangement.
If your circumstances change your IP can ask creditors to agree to an amended offer, however, if this isn’t approved your IVA could fail.
If your IVA fails, it could lead to you being made bankrupt.
IVAs are recorded on the Insolvency Register, which is a public register.
An IVA can affect your credit rating and remains on your credit file for six years after it is accepted.

How will an IVA affect my credit rating?

Wed, 29 Mar 2023 14:39:44 GMT

An Individual Voluntary Arrangement (IVA) can be a positive way to manage problem debts that are spiraling out of control.

If you live in England, Northern Ireland or Wales and are struggling to pay at least £5,000 to two or more creditors then this debt solution could be the best option for you.

That said, getting out of debt is never easy, and even though an IVA will help you improve your finances in the long-term, it can have a temporary impact on your credit rating.

Why will my IVA affect my credit rating?

There is no escaping the fact that an IVA will affect your credit rating. It’s a legally binding debt solution that uses government legislation to consolidate your payments into one affordable monthly amount and write off up to 81% of unsecured debt.

However, as you will be declared as insolvent your Individual Voluntary Arrangement will be recorded on your credit report where it will stay for six years. Understandably this will have an impact on your score which will go down as a result and can make it more difficult to secure credit in the future.

By entering into an IVA, you are admitting that you are struggling to repay past or current debts and despite entering the arrangement being a positive step to dealing with what you owe, future creditors may view you as a high-risk customer. This means that in future you may face higher interest rates or be rejected for credit such as loans or credit cards

Despite having a negative impact on your credit score it’s important to keep in mind the positive aspects of an IVA.

Your Individual Voluntary Arrangement can offer you a fresh start. Although your credit rating will be impacted for six years, once your arrangement is complete you can begin working to build your credit again.

How do I understand my credit score?

Understanding your credit score might seem daunting but it doesn’t need to be. Put simply, the higher your score, the better access you’ll have to credit deals. The lower the score, the harder it will be for you to be accepted for new lines of credit.

Any time you borrow money, or enter a debt solution like an IVA, details of those transactions are added to your credit report, which is a documented history of your financial life.

The details registered on your credit report can be viewed by the credit reference agencies (like Experian or TransUnion) who decide what your credit score will be.

Any transaction listed on your credit report that the credit reference agencies interpret as making you a risky borrower (expensive loans, debt arrangements, defaulted payments), are likely to lower your credit score.

How long will an IVA stay on my credit report?

Your IVA will appear on your credit report from the date it is approved, and will stay there for six years.

If you finish your agreement early, for example if you receive a windfall or inheritance that will clear the debts included in the proposal, your IVA will still remain on your file but marked as ‘complete’.

Can you pass a credit check with an IVA?

As an IVA can impact your credit rating it can cause problems obtaining credit in the future. It is worth keeping this in mind if you plan to move or rent a house or other property through a letting agent during your IVA term.

You may still be able to get some types of credit during your agreement – typically with low credit limits and high interest rates. It’s worth remembering that applications for credit over £500 need to be approved by the insolvency practitioner (IP) managing your arrangement.

You should also keep in mind that every application for credit will impact your score so should only apply for credit you really need or are likely to be approved for.

How can I remove or update an IVA on my credit report?

Your proposal will appear on your credit report from the day that it is approved and will remain there for six years.

During this time you don’t need to do anything – when your IVA comes to an end it will automatically be marked as ‘complete’.

If you are worried your credit report is incorrect in the future, you can ask for this to be amended but you may be required to send proof of your IVA completion certificate or a letter from your IP.

It is also possible to add details of the reason behind your insolvency to your credit report. According to Experian, you can ask the company to add a note on your report which explains your circumstances, such as redundancy or long-term illness.

How long after an IVA can I get credit?

As mentioned previously, you can try to obtain credit during the term of your agreement, but this is subject to approval by your IP.

Your IVA, and credit rating, will restrict your borrowing power for six years and as such it will make it tricky to access the best deals.

However, after your agreement comes to an end you can begin sensibly rebuilding your score by accessing small amounts of credit.

How can I improve my credit score after my IVA?

When you complete your IVA your credit score will likely be low. Although this may seem frustrating, especially as you will have made every payment required towards your agreement you can still take steps to improve it.

After six years in your IVA, your borrowing powers will slowly increase and despite seeming daunting the best way to improve your chances of increasing your score and accessing the best rates is to borrow.

You should keep an eye on your credit score using a reputable company and take small steps to improve your score.

It’s important at this point not to undo all the hard work that you’ve put in – after all you don’t want to lose control of what you owe again. If you are considering taking out credit of any kind, whether a credit card, loan or even a phone contract, the most important thing is to be realistic.

You should only take out small amounts of credit you know comfortably fits within your budget and you won’t miss any payments. You should never use more than 50% of your total available credit and make sure you stay within your agreed limits.

Most importantly, you should pay any balances in full each month to avoid interest building up.

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What can I expect from my annual review?

Wed, 29 Mar 2023 13:47:21 GMT

When you enter an Individual Voluntary Arrangement or IVA, you are entering into a five or six-year financial commitment.

With that in mind, it’s important for us to stay in touch to make sure that your arrangement is still suited to your current circumstances – a lot can change during your IVA payment term.

That’s why we carry out an annual review to keep in touch and make sure everything is going as well as it can be.

It’s also important to note that completing the annual review is part of the terms of your arrangement and that failure to do so could result in the failure of your plan.

Your annual review is exactly what it sounds like – it’s a yearly review of your financial arrangement with Creditfix that allows us to make sure your payments still meet your affordability.

Once a year we’ll get in touch via email or text to let you know it’s time to complete your annual review and help support you every step of the way.

While this might seem like a long-winded task, that couldn’t be further from the truth. In fact, it takes a matter of moments to complete and we’ll do the rest for you.

How do I complete my annual review?

When it’s time for you to complete your annual review, we’ll send you an email advising you of the steps to follow. This will include details of the information we require – it is quick and easy to supply this information using your account on the Parkfield portal.