IVA Questions & Answers : 11- 20

« go to 1 - 10

11. Can I keep my bank account?

Yes, but in reality you probably will not want to. If you owe money to the bank where your salary is paid into, guess what they could do when they receive funds? take it all! One of the many benefits of an IVA is that you can open a new simple bank account (without an overdraft facility) with a bank that you do NOT owe money to. This ensures that you are totally in control of your income.

12. So how much of my debt is written off?

It's more useful to think in terms of how much you're paying back as percentage of the total debt, rather the debt write-off as it's a creditor who writes off a debt - not the debtor, nor ourselves.

How much the creditors writes-off is the total debts at the start of the IVA, less what you pay into the IVA over it entire duration, plus our fees.

Each case is different and what your creditors will accept depends on your personal circumstances. There are some IVA cases where over 85% of the debt is written off - but these are rare. The norm is much lower at around 50% to 60%.

Example of debt repaid

13. What if one of my creditors does not agree to my IVA?

Your proposal needs 75% of the creditors (by value of debt owed) to vote in favour for it to be accepted. For example, if you owe £40,000, and every creditor voted, then you would require £30,001 of your creditor votes to be in your favour.

If the creditor (or group of creditors) that refuses your case is/are owed more than 25% of your debt then your IVA application has failed.

One of the most important tasks of the Insolvency Practitioner is to ensure that they obtain enough votes to get your IVA accepted. Insolvency Practitioners would not normally proceed with a case that would not get sufficient votes as it reflects badly upon them. If your Insolvency Practitioner decides to go ahead with your IVA proposal to your creditors, there is a good chance that it will be accepted.

14. What happens if the IVA is not approved?

You will have to come to an informal arrangement with your creditors (or use the services of a debt management company, maybe ourselves) to repay your debts or declare yourself bankrupt. We wouldn't make an IVA proposal without a high confidence of acceptance. Around 95% of the IVAs we propose eventually become IVAs. The ones that fail tend to be where something has come to light at the Meeting of Creditors that was previously unknown to us. Therefore a full and frank disclosure of your finances is essential from the offset.

15. Can I use credit cards or take out a new loan during an IVA?

No, During the IVA, you will not be able to use store or credit cards. Also, you will normally not be allowed to borrow more money. It may be possible to change an existing mortgage while you are in an IVA.This must be done under the supervision of your IVA supervisor.

16. My job is salary and commission based.
How are my IVA payments calculated?

This would depend on the role, the salary/commission ratio and documentation you could produce to demonstrate an on-going significant proportion of your income comes from commission or bonus; and that this is expected to continue. If the commission/bonus can't be replied upon to to a high degree of certainty, we would recommend working from your basic salary and then any extra earned through commission will be covered by what known as an uplift clause. This typically entitles you to keep the first 10%, and anything thereafter must be split 50/50 between yourself and additional IVA payments.

The same applies to overtime pay.

17. Can loans from friends / family be included in an IVA?

All personal debts must be mentioned in the IVA proposal and preferably included. This includes unofficial debts to family members or friends at 0% interest, payable "whenever" or otherwise. Friends and family would receive the same pro-rata dividend as other creditors and have the same (% share of the total debt) pro-rata voting rights when it comes to approving the IVA. Alternatively, you can choose to keep them out but if doing this, no allowance can be made to pay them back separately; in this circumstance they may have to wait until you have completed the IVA.

18. I'm self employed, can I do a IVA and keep trading?

Yes. IVAs for self employed people are generally more complex and often require more work by the Insolvency Practitioner and their team. Once we have all of your information we will be able to discuss this issue with you and look at how this may alter the way your IVA proposals is made. If your accounting and tax return documentation is not in order and up to date, this will prejudice your IVA application, although tax arrears themselves can be included in an IVA.

19. My spouse/partner has no debts. Will they have to contribute to my IVA?

No, but their contribution the household income impacts your ability to pay your creditors. Your creditors will expect your partner to pay a proportion of the household expenses in the same ratio as your respective level of incomes, so that what's left over is also in proportion to this.

For example, if you earn twice as much as your partner and from your combined income, £600 is left over from the household budget each month, then you would be expected to pay £400 of this into the IVA and your partner gets to keep £200.

19. What happens when my IVA agreement is over?

Providing that all the terms of your proposal have been carried out, then your creditors will have no further claim against you and any outstanding debts will be written off.

20. Are there restrictions on holding public office or public employment while in an IVA?

Unlike bankruptcy, an IVA does not restrict you from holding positions such as a Governor of a School or Justice of the Peace. It may however restrict you from being a company director, depending on what the company’s articles of association state.

In some cases it can be written into an employment contract that entering into an IVA results in dismissal, particularly if you work in the area of insolvency.

go to 21 - 20

« go to 1 - 10