Get Out Of Debt?

Get Out Of Debt
  • Write off unaffordable debts
  • Lower your monthly payments
  • Stop creditors from contacting you

How Can I Get Out of Debt?

With a simple legislated debt solution you can consolidate all your debts into one lower, affordable monthly repayment. Make one set payment per month for a set period, and after the period expires any remaining debts left are legally written off. This can be up to 90% depending on your circumstances.

Individual Voluntary Arrangement (IVA)

An IVA is an agreement between creditors and an individual, referred to as an Individual Voluntary Arrangement or IVA, can be a good way to pay off debts at a reasonable rate.

If you are a citizen of Scotland, an IVA will not be available to you. Instead, a protected trust deed would be required. Protected trust deeds are a similar financial solution, however there are different risks, fees and benefits associated with them.

Understanding how an IVA works

Essentially, an IVA is an agreement, which is legally binding, between creditors and yourself. If you adhere to the agreement of the IVA, you will be protected from creditors taking legal or financial action against you. Additionally, there will be a write off of a portion of your debt.

Do creditors need to agree to an IVA?

Creditors must decide whether to approve or reject an IVA. There will be a creditors’ meeting arranged, so that they can make the decision to approve or reject the proposed IVA. Creditors cannot be forced to approve an IVA. However, most creditors tend to favour an IVA proposal, as long as it represents your best offer.

In order for an IVA proposal to gain approval, there must be a vote in favour of the proposal by at least seventy-five percent of the value of creditors voting.

Creditors may also ask for modifications to the proposal. For example, they may agree to the proposal if you agree to make some modifications. You do not need to agree to the modifications immediately. If you need time to consider them, there can be an adjournment of the creditors’ meeting for up to fourteen days. However, if you immediately agree to the proposed modifications, the IVA can be approved during the initial meeting.

Is an IVA the right choice?

If you decide that an IVA is your best financial solution, you will be provided guidance and support throughout the IVA process. IVA services, including licensed insolvency practitioners, are experienced in the entire IVA process.

What type of debts can be included in an IVA?

Most types of debts can be included in an IVA, including:

  • Personal loans
  • Credit cards
  • Overdrafts
  • Catalogues
  • Debts to friends or family
  • Payday loans
  • Council tax arrears
  • Gas and electric arrears
  • Water arrears
  • National insurance and income tax arrears
  • Store cards
  • Benefit overpayments or tax credit
  • Other outstanding bills

What types of debt must be excluded from an IVA?

There are some types of debt that cannot be included in an IVA, such as:

  • Social fund loans
  • Student loans
  • Child support arrears
  • Court fines
  • TV license arrears
  • Hire purchase agreements
  • Secured Loans and mortgages

There are many IVA pros and cons to consider, so please consider these carefully before making your decision to apply for debt help.

Can an IVA include joint debts?

If you have a debt that includes both your own name as well as the name of another individual, this is a joint debt. You can include a joint debt in an IVA. However, the other person involved with the debt must continue making payments toward the debt, as he or she will still be responsible for it.

Including a joint debt in an IVA can be a bit complex. For example, the other person responsible for the debt will still be required to pay any remaining money back, even if some of the debt is written off in your arrangement. It is best to receive help and guidance from a professional before including a joint debt in an arrangement, so that you fully understand how it will affect both yourself and the other person responsible for the debt.

What happens to debt, as the result of an IVA?

An IVA proposal is first presented to your creditors. If they approve it, you will enter into an agreement to make sixty or seventy-two monthly payments towards the arrangement. In the case of a lump sum arrangement, there will be a one-off larger payment that you must make into it.

Once you have made all the payments into the arrangement, a certificate of completion will be issued to you. Once this happens, any outstanding balances for the debts that were included in the IVA will be written off.

Choosing between an IVA or bankruptcy

Bankruptcy and individual voluntary arrangements work quite differently, even though they are both methods of dealing with insolvency.

In both cases, these legal processes offer protection from creditors taking action against you as a result of a debt. Both provide a means for some or all debts to be written off.

If you are unsure of which option to choose, consider the information provided below. It is important to consider both solutions, and how each may affect different areas of your life. It is an important decision which must be carefully considered so that you can make the right choice.

How will an IVA affect home rental or ownership?

Depending on whether you own or rent your home, a bankruptcy and an IVA will have different effects on your home.

If you rent your home, it is unlikely that an arrangement would have any effect on your ability to stay where you currently live. If you rent your home and go bankrupt and your rent is current, you will generally not need to move. However, if you are in arrears with your rent, you may be asked to move if you go bankrupt. The same may be true if you rent from a private landlord who has a condition within the tenancy agreement concerning bankruptcy.

If you own your home, entering into an arrangement does not mean you will be forced to sell your home. However, you may be asked to re-mortgage your home six months before your IVA ends. The requirement to re-mortgage will only apply if you can do so affordably. If not, you may be required to pay an additional twelve months of payments, or raise additional money from a third-party source.

If you go bankrupt and own your home, the official receiver handling the bankruptcy will decide what must be done with the home. You may be able to keep the home if you do not have any equity in it. If you do have equity in it, it is still unlikely that you will be required to sell it. However, there is a two year and three month period of time during which the official receiver can decide what must be done with the house. If the home’s value goes up, the official receiver could ask you to sell it.

Owning a car during a IVA or bankruptcy

If you enter into an IVA, you can generally keep your vehicle, as long as it is a model that is moderately priced. However, if you go bankrupt, you will generally be expected to sell your vehicle, unless it is of low value or essential to your lifestyle, as would be the case if you needed it to go to work.

How can a job be affected by a bankruptcy or IVA?

There are some jobs which may be affected if you go bankrupt or enter into an arrangement. These include:

  • Law and property roles
  • Company directors
  • Pub licensees
  • Accountancy and finance roles

Most jobs are not affected by an individual voluntary arrangement. However, it is best to inquire with your trade union or professional membership body, or speak with your HR department, before making the decision to either go bankrupt or enter into an arrangement. By doing so, you will be able to fully understand the impact either option may have on your job. Generally, a bankruptcy is more likely to cause employment issues, but if you work at a senior level, both may involve issues.

What does bankruptcy and an IVA have in common?

A bankruptcy and an IVA have some things in common. Both options would:

  • Write off your debts. Because both are insolvency solutions, once either process is completed, the balance of your debt will be written off.
  • Stop further contact by your creditors. Because both are formal debt solutions, creditors are not permitted to contact you after either is set up.
  • Be recorded on your credit file. This information will stay on your file for six years, during which time you may find it more difficult to take on further credit.
  • Add your name to the Individual Insolvency Register. This is the database of everyone who has been in an IVA, debt relief order or bankruptcy.


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