Making sure you are fully informed from the start is vital when deciding on any debt solution. Here are some of the most common questions we hear – If your question is not here, call our staff on 0800 072 662 or use our LiveChat function.
“What is the difference between an IVA and a Debt Management Plan?”
An IVA is a legally binding agreement to repay your creditors unlike a Debt Management Plan which offers more flexibility and is not legally binding. In an IVA your debts will be repaid in a specific amount of time 5-7 years (dependant on circumstances), whereas a Debt Management Plan continues until your debts are paid in full.
Whilst in an IVA, creditors agree not to pursue you for the debts of take further action – this is not guaranteed under a Debt Management Plan.
“How much will I have to pay towards my IVA?”
The idea of an IVA is that it is affordable given your circumstances. Both InControl and our trusted partner will conduct a full assessment of your situation and ensure that all your essential living expenses are accounted for, the remaining amount will be the amount applied to your debts. See our minimum requirements under What is an IVA?
“Will I have enough money to pay my essential expenses?”
Yes. When we carry out the financial review all of your essential expenses are accounted for. This is a legally binding commitment to repaying your debts so it is vital that you can maintain your payments for the full term of your IVA.
“How long will it take me to clear my debts on an IVA?”
The term for an IVA is dependent on individual circumstances i.e a homeowner who can release equity. The term for an IVA can be between 5 and 7 years.
“What are the fees for an IVA?”
The fees for an IVA depends on your disposable income, this is the amount left over after paying your secured debts and your essential living expenses. The IVA fees will be deducted from the payments you make which will be calculated following a full assessment and prior to all parties agreeing to the IVA. Generally your first 12 months of payments are retained for the nominee’s fees to set up the IVA. After the 12 month period, a percentage will be deducted from your payments to pay supervisors fees for administering the IVA. On successful application our trusted partner will provide full disclosure of the fees. All fees will be clearly documented and explained to you and there will be no hidden costs. See our illustration on IVA fee’s.
“What role does an Insolvency Practitioner (IP) play?”
The IP will assess you and decide if you are eligible for an IVA and how much you should be paying towards it. IP’s are licenced by the Insolvency Practitioners Association, the Insolvency Service or the Institute of Chartered Accountants amongst others.
“Why do creditors accept IVA’s?”
An IVA is legally binding between you and your creditors. You are both in agreement that a portion of the outstanding debt is repaid. The IP will ensure that the amount repaid is fair to both you and your creditors. This solution is much preferred to the creditors as it prevents the need for legal action. In addition your creditors are guaranteed a return which is far greater than if they pursued you for bankruptcy.
“Do all my creditors have to agree to an IVA?”
For an IVA to be accepted, creditors making up 75% of the total balance of your debt must vote in favour of the IVA.
“What will an IVA do to my credit file?”
An IVA will affect your credit rating for 6 years from the date your IVA commences.
If your IVA has a 5 year term you may struggle to obtain credit in the year after your IVA has completed.
“What if I can no longer afford the payments toward my IVA?”
Your IVA will be reviewed regularly to identify any changes in circumstances whether positive or negative. Changes can be made to your IVA but all parties must be in agreement. Failure to adhere to the IVA agreement without out prior explanation could result in your bankruptcy.
“What will happen to my home?”
If you are a homeowner and have equity in your property you may be asked to release it so that a lump sum can be paid to your creditors. The implications of this will be fully explained to you by the IP.
“What if I have secured debts?”
If you have secured debts the IP will take these into account and ensure that you can afford to maintain these commitments as well as your IVA payments. Failure to maintain secured payments could result in the repossession/forced sale of those items i.e your home.
“What happens at the end of an IVA?”
Once you have made all the agreed payments under an IVA your creditors will write off any remaining debt (which is part of the IVA) leaving you debt free. You will still have to pay any debts which are not part of the IVA.