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Thinking of going ahead with an IVA?

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i This solution is only available in England, Wales and Northern Ireland.

How an IVA affects me

How will an IVA affect me?

An individual voluntary arrangement (IVA) is a legally binding agreement between you and your creditors that helps you pay off your debts at an affordable rate. It’s a form of insolvency that can affect your financial situation in many ways.

We recommend that you get some professional, impartial advice before taking on an IVA, as there are several restrictions and obligations that you need to consider.

Can I get an IVA?

Not everyone can qualify for an individual voluntary arrangement (IVA).

IVAs are generally suitable for people with a sustainable regular source of income. People with a lump sum to pay towards their debts may also qualify for an IVA.

Not all debts can be included. Most common debt types can be included, such as credit cards, personal loans, overdrafts, gas and electric arrears and payday loans. But secured debts (like mortgages or secured loans) and some other debts (including student loans, fines and child support) will still have to be paid separately, outside of the IVA.

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What restrictions will I face on an IVA?

An IVA should be carefully considered because of the possible consequences for your personal, professional and financial life.

  • Your credit rating will be affected for six years, starting from the date the arrangement is agreed.
  • You’ll have to keep to a budget for the full term of your IVA, usually 60 or 72 months.
  • If you miss payments, your IVA will be extended to make up the arrears
  • An IVA could also affect your employment; you should check your contract or speak to your HR department.
  • An IVA can also affect any hire purchase agreements you may have.
  • During the IVA you must declare any additional assets you receive after it’s been approved. It’s likely you’ll have to pay these into your IVA.
  • If you earn any additional income or bonuses you’ll have to pay some of this into the IVA in addition to your normal contribution.
  • Your IVA will be recorded on the Insolvency Register. The register is maintained by the Insolvency Service and is available for viewing by the general public. It contains all details of current IVAs.
  • You can’t take out any new debts above £500 during the IVA.
  • If you enter into an individual voluntary arrangement (IVA), the details will be recorded on the Insolvency Register.

How will an IVA affect my home?

Under an IVA it's unlikely you'll have to sell your home. However, depending on the amount of equity in your home, you may have to remortgage six months before the end of your IVA to release equity. This will then be paid into your IVA.

If you do have to remortgage, you won’t be expected to increase your mortgage to more than 85% of the value of your property. The mortgage will also be assessed to make sure it’s affordable.

While you're on an individual voluntary arrangement (IVA) it’s unlikely that you’ll get a new mortgage.

Once you’re on an IVA your Insolvency Practitioner (IP) will discuss all of this with you in more detail and details relating to the remortgage will be included in your IVA proposal.

What happens if I miss payments to my IVA?

If you can’t make a payment to your IVA, you must let your IP know as soon as possible.

Your IVA agreement will allow you a short payment break if you have an emergency. You may also be able to alter your monthly payments with the agreement of your IP if the change is small.

If you need a longer payment break, or your situation has changed a lot, your IP may need to contact your creditors to agree the changes.

If you don’t speak to your IP about missing payments you may be in breach of your IVA terms.

Any payments you miss will be added to the end of the IVA. This means that missing payments will lengthen the time it takes for your IVA to complete.

Will an IVA affect my credit rating?

When you enter into an IVA, it’ll appear on your credit file for six years. The six years begin from the date your IVA is approved.

If you finish your IVA early, it’ll still appear on your credit file for six years, however it will be marked as complete.

If your IVA takes longer than six years, it’ll appear on your credit file until the IVA completes.

The IVA will impact your credit file in a negative way. If you finish your IVA early, you may struggle to take out further credit while it’s still on your credit file.

In addition, your creditors may record a default notice on your credit file. The default notice indicates that the original credit agreement has been broken, and will be visible on your credit file for 6 years. This is a normal part of the collection process that happens when you can’t make the original payments anymore. Any defaults added should be dated no later than the date your IVA was approved.

What happens to my assets on an IVA?

An asset is something of significant value that you own, for example a house, car or item of jewellery, or savings or shares.

If you enter into an IVA, you’d need to let the insolvency practitioner (IP) dealing with your IVA know about your assets.

Assets aren’t necessarily included in your IVA. Each IVA is different as it’s tailored to suit your situation. In most cases, you’ll be able to keep items like your phone, jewellery, car and home.

If you own a car, you’ll usually be able to keep it, depending on the value. Your insolvency practitioner will value the car to check how much it’s worth.

If your car is worth quite a lot, the IP may question whether you need to own a vehicle that’s worth a lot of money, or your creditors might ask you to sell it. If you’re asked to sell your car, you’ll usually be allowed to keep some money to buy a replacement.

If you own two or more cars, you may be expected to justify this to the IP. If there’s no valid reason for owning an extra car it may be sold so the money from the sale can go towards your IVA.

If you have a car on hire purchase then it’s likely you’ll be able to keep making payments towards it so you can keep it. You would need to speak with the hire purchase company to check if they have a problem with you entering into an IVA.

If the hire purchase agreement comes to an end during your IVA, the extra money that becomes available as a result will be paid towards your IVA.

Will my job be affected by an IVA?

There are certain jobs that may be affected if you enter into an IVA. These tend to include roles in finance, law, property, accountancy and similar.

If you’re unsure about whether you’ll be able to keep your job if you have an IVA, check your employment contract or speak to your professional membership body or trade union, or ask to speak to your HR department confidentially.

Get free IVA advice

For free, confidential help with individual voluntary arrangements, you can speak to one of our expert debt advisors. If you already have an IVA, you should always discuss your situation with your insolvency practitioner first.

To find out if an IVA is the best debt solution for your situation, visit our online debt advice tool.