No, you must be technically insolvent. There are two basic tests of insolvency:
- Your liabilities (debts) are greater than your assets
- You are unable to pay your debts as they fall due for payment
If both these conditions apply to you, then seek professional advice as an IVA may save you from Bankruptcy.
If only the second point applies, then an informal debt management plan could be the most appropriate course of action to reduce your current debt repayment levels.
If you undertake an IVA, you will have to give up all your current credit (e.g. credit cards and store cards) and you will not be allowed to take additional unsecured borrowings until your IVA is completed. However, you will be allowed to use prepaid cards.
The bottom line is that undertaking and IVA does not mean that you are “Blacklisted” for ever. Once it is complete your credit rating should repair fairly quickly.
You can pay off any of your unsecured debts with an IVA.
- Personal loans
- Credit and store cards
- Catalogue debt
- Council Tax arrears
- Benefit arrears
You can’t pay off any secured debts, like your mortgage, through an IVA so you will need to continue to pay these.
Your monthly IVA payments will take these into account though, to make sure you have money available to pay them.
You don’t have to worry about your home.
You might be asked to release equity by remortgaging in the last year. If you’re unable to, your IVA could continue for up to another 12 months.
If you’re a tenant, your new monthly payment will leave enough money to cover your rent.
An IVA is a private agreement between you and your lender. You don’t have to tell anyone that you’re on an IVA, if you don’t wish to.
Your details will be added to the Insolvency Register until three months after your IVA ends. This register is publicly available, however, someone would have to search for your details to find them.
Your lenders will have to stop contacting you and chasing you for payments if your IVA is accepted.
Your lenders won’t be able to take any further legal action against you.
For most people, an IVA will not affect their job.
Keep in mind though, that some employers can have rules against employing people in certain positions who are on an IVA, or have been in the past.
Your job can be affected:
- if you’re responsible for money, e.g. an accountant, or
- if you advise people about their money e.g. a mortgage advisor.
An expert will be able to tell you if your job is likely to be impacted.
Any business or individual that is struggling with repaying their debts may be eligible for an IVA, however, there are certain criteria (see below) where an IVA is better recommended for both you and your creditors over other Insolvency solutions, such as Bankruptcy.
Insolvency is the term given to a person or company that is unable to repay their debts, on time, as agreed by their creditors. There are different types of Insolvency solution available for dealing with debts.
An IVA; short for Individual Voluntary Arrangement, is a formal insolvency solution that allows you to deal with debts that you cannot afford to repay. In an IVA you agree an affordable repayment plan with your creditors (the people you owe money to), which can be a monthly repayment or a lump sum (if you can gain access to it). You usually pay less than what you owe in an IVA and on completion of the arrangement, any remaining debts are written off.
To arrange an IVA, your proposal for an Individual Voluntary Arrangement (IVA) must be a full and true account of your current financial situation.
You will need to provide:
- The name and contact details for all companies, organisations and individuals that you owe money to and the amount that is owed.
- Details of your monthly income and spending.
- Information about your house, including its value and any mortgage. You must state who your mortgage provider is and the amount of your mortgage (unlike bankruptcy, you will not be forced to sell your house in an IVA).
- Information about any loans that are secured on your home.
- Details of any assets of significant value, which may be of interest to your creditors. (Unlike bankruptcy, it’s up to you what you decide to keep or to sell to meet your debts; but your creditors may be more inclined to support your IVA arrangement if you sell the Roller and buy a Ford instead.
Don’t worry if you don’t have all this information easily to hand, our advisors will help you get it together – and, with your permission, we can approach creditors on your behalf.