IVA guide

Free, Impartial

Debt Advice

StepChange Debt Charity

IVA guide

Contents

Introduction How this guide will help you 3

Section 1 IVAs 4

­• About­IVAs

• How­an­IVA­works

• Why­an­IVA?

­• How­will­an­IVA­affect­me?

• IVAs­from­StepChange

• IVAs­at­a­glance

Section 2 Other debt solutions 9

­• Debt­management­plan­(DMP)

• Debt­relief ­order­(DRO)

• Bankruptcy

Section 3 Our debt help 11

­• How­can­we­help

• Contacting­StepChange­Debt­Charity

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StepChange Debt Charity

IVA guide

Introduction

Free anonymous debt adviceFree­debt­help­online­from­StepChange­DebtCharity­at­www.stepchange.org

How this guide will help you

StepChange­Debt­Charity­is­a­registeredcharity­that­helps­hundreds­of ­thousands­ofpeople­with­debt­problems­every­year.We­give­free,­realistic­debt­advice­and­canassist­with­a­range­of ­debt­solutions.

If ­you’re­struggling­to­keep­up­with­your­debtrepayments­and­looking­for­a­way­to­regain­control­ofyour­finances,­you­might­be­wondering­if ­anindividual­voluntary­arrangement­(IVA)­is­the­best­wayforward­for­you.­This­guide­is­here­to­answer­someof ­your­questions­about­IVAs.­

The­guide­explains:

•­What­an­IVA­is,

•­How­an­IVA­works,

•­Who­an­IVA­is­for,

•­How­having­an­IVA­could­affect­you,

•­How­we­can­help,­and

•­How­you­can­contact­us.

IVAs­are­not­suitable­for­everyone.­It’s­very­importantthat­you­get­professional,­impartial­advice­beforetaking­on­an­IVA,­because­there­may­be­a­moreappropriate­debt­solution­available.

Our­online­StepChange­Debt­Remedy­tool­can­giveyou­an­anonymous­assessment­of ­your­situation­andtailored­debt­advice­to­help­you­decide­which­is­thebest­debt­solution­for­you.

If ­an­IVA­is­the­best­debt­solution,­StepChangeVoluntary­Arrangements,­our­own­IVA­service,­canhelp­you­through­the­whole­process.

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IVA guide

IVAs

About IVAs

IVA­stands­for­individual­voluntaryarrangement.­An­IVA­is­a­legal­proceduredesigned­to­help­people­with­unsecured­debts.

An­IVA­is­a­form­of ­insolvency.­This­means­that­inorder­to­apply­for­an­IVA­your­unsecured­debts­needto­be­greater­in­value­than­the­total­value­of ­anyassets­you­own,­including­any­property,­such­as­your­home.

An­IVA­is­a­legally­binding­agreement­between­youand­your­creditors.­With­an­IVA,­your­creditors­agreeto­accept­an­affordable­monthly­payment­towardsyour­debts­over­a­set­period:­usually­5­or­6­years.In­some­cases,­you­might­be­able­to­make­a­lumpsum­payment­toward­your­debts­instead,­or­acombination­of ­monthly­payments­and­a­lump­sum.

During­the­period­of ­your­IVA,­providing­you­keep­tothe­terms­of ­your­agreement,­your­creditors­areprevented­from­contacting­you,­pursuing­you­for­thedebt,­or­adding­further­charges­or­interest­to­theamount­you­owe.­At­the­end­of ­the­specified­periodany­remaining­unsecured­debt­will­be­written­off.

You­cannot­arrange­an­IVA­by­yourself,­you­will­needthe­help­of ­an­Insolvency­Practitioner.­IVAs­are­notsuitable­for­everyone­and­we­strongly­recommendthat­you­get­professional,­impartial­advice­beforetaking­on­an­IVA.­Our­debt­advisors­and­onlineStepChange­Debt­Remedy­tool­can­give­you­the­free,realistic­advice­you­need­to­find­out­which­is­the­bestdebt­solution­for­you.

If ­an­IVA­is­the­best­debt­solution­for­you,StepChange­Voluntary­Arrangemets,­our­own­IVAservice,­can­help­you­every­step­of ­the­way.

Free debt adviceFree­debt­help­from­StepChange­Debt­Charitycall­0800 138 1111

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IVA guide

IVAs

How an IVA works

If ­an­IVA­is­the­best­solution­for­your­particularcircumstances,­you­will­need­an­InsolvencyPractitioner­(IP)­to­set­one­up­on­your­behalf.

IVA­proposal

Your­IP­will­look­at­your­finances­and­help­you­to­drawup­a­proposal­to­send­to­your­creditors.­You­need­tocheck­the­proposal­carefully­as­it­is­your­proposaland­you­could­be­prosecuted­if ­it­is­misleading.

This­proposal­will­recommend­that­your­availablesurplus­income­(in­other­words,­money­you­have­leftover­after­paying­your­essential­living­expenses)­isused­to­repay­your­debt.­The­arrangement­will­last­foran­agreed,­fixed­period:­usually­5­or­6­years.­After­thefixed­period­has­ended,­any­debt­that­you­haven’trepaid­will­be­written­off.

In­some­cases,­you­may­also­propose­that­you­pay­alump­sum­towards­your­IVA.­If ­your­IVA­proposal­isaccepted,­there­will­be­a­fee­to­pay,­but­this­will­beincluded­in­the­agreed­monthly­payment­you­aremaking­towards­your­debts.

IVA­vote

Your­IP­will­send­your­IVA­proposal­to­each­of ­theunsecured­debts­held­by­your­creditors.­A­creditors’meeting­will­then­take­place­during­which­your­IVAproposal­will­be­accepted­or­rejected.­The­majority­ofyour­creditors­will­need­to­vote­in­favour­of ­the­IVA­forit­to­go­ahead.­This­means­that­among­those­votingon­the­day­(some­may­not­vote),­creditors­holdingover­75%­of ­the­total­value­of ­your­debt­must­agreeto­your­IVA.

Creditors­may­put­forward­modifications­to­theproposal­but­they­cannot­impose­these­on­you­–­youcan­decide­whether­or­not­to­accept­them.­

Free anonymous debt adviceFree­debt­help­online­from­StepChange­DebtCharity­at­www.stepchange.org

Once­your­IVA­is­agreed­it­becomes­legally­binding.None­of ­your­creditors­(even­those­who­did­not­voteor­who­voted­against­the­IVA)­will­be­able­to­pursueyou­for­the­unsecured­debt­or­add­further­interest­orcharges­to­it,­as­long­as­you­keep­to­the­terms­of ­your­IVA.

Completion­of ­your­IVA

Your­IP­will­review­your­finances­once­a­year­andsend­an­annual­report­to­both­you­and­your­creditors.Your­IP­will­also­let­you­know­when­your­IVA­hasbeen­completed.

When­your­IVA­is­completed,­any­remainingunsecured­debt­will­be­written­off.

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IVA guide

IVAs

Why an IVA?

For­many­people­struggling­with­repayments,­an­IVAcan­be­a­good­solution­to­their­debt­problems.

More­affordable

An­IVA­can­make­repaying­your­debts­easier­andmore­manageable­because­your­current,­multipledebt­repayments­will­be­combined­into­one,­reducedand­affordable­monthly­payment.

Your­Insolvency­Practitioner­will­take­all­your­essentialliving­expenses­into­account­so­you­will­only­pay­whatyou­can­afford­towards­your­debts.

Less­stressful

An­IVA­can­reduce­much­of ­the­stress­associatedwith­your­debt­problem.­As­long­as­you­keep­to­theterms­of ­your­IVA,­your­unsecured­lenders­areprevented­by­law­from­contacting­you.­

This­means­all­letters­and­telephone­calls­will­stop.Your­creditors­will­not­be­able­to­take­any­furthercourt­action­against­you­to­recover­the­debt.­They­willalso­not­be­able­to­add­any­further­interest­or­chargesto­your­debts.

What’s­more,­under­an­IVA,­you­may­be­allowed­to­keep­any­property­you­own,­making­it­a­morefavourable­alternative­to­bankruptcy­for­many­homeowners.

Fresh­start

Once­you­have­completed­your­IVA,­your­remainingunsecured­debts­will­be­written­off,­so­you­can­makea­fresh­financial­start.

Free debt adviceFree­debt­help­from­StepChange­Debt­Charitycall­0800 138 1111

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IVA guide

IVAs

How will an IVA affect me?

We­recommend­that­you­get­some­professional,impartial­advice­before­taking­on­an­IVA,­as­there­areseveral­restrictions­and­obligations­that­you­needto­consider.

Eligibility

Not­everyone­will­qualify­for­an­IVA.­IVAs­are­generallysuitable­for­people­with­a­sustainable­regular­sourceof ­income.­People­with­a­lump­sum­to­pay­towardstheir­debts­may­also­qualify­for­an­IVA.

Only­your­unsecured­debts­can­be­included.Examples­of ­unsecured­debts­include­credit­cards,personal­loans­and­overdrafts.­Secured­debts­(likemortgages­or­secured­loans)­and­some­other­debts(including­student­loans,­fines­and­child­support)­willstill­have­to­be­paid­separately­outside­of ­the­IVA.

Restrictions

An­IVA­should­be­carefully­considered­because­ofthe­possible­consequences­for­your­personal,professional­and­financial­life.

These­include­the­following:

•­Your­credit­rating­will­be­affected­for­six­years,starting­from­the­date­the­arrangement­is­agreed.

•­You­will­have­to­keep­to­a­budget­for­the­full­term­ofyour­IVA:­usually­5­or­6­years.

•­An­IVA­may­affect­the­terms­of ­your­employment;you­should­check­your­contract­or­speak­to­your­HR­department.

•­An­IVA­can­also­affect­any­hire­purchaseagreements­you­might­have.

•­Over­the­term­of ­the­IVA­you­must­declare­anyinheritance,­bonuses­or­windfalls.­It­is­likely­you­willhave­to­pay­these­into­your­IVA.

•­Your­IVA­will­be­recorded­on­the­InsolvencyRegister.­The­register­is­maintained­by­theInsolvency­Service­and­is­available­for­viewing­bythe­general­public.­It­contains­all­details­of ­current­IVAs.

Your­home

Under­an­IVA­it­is­unlikely­that­you­will­have­to­sellyour­home.­However,­depending­on­the­amount­ofequity­in­your­home,­you­may­have­to­remortgageyour­property­six­months­before­the­end­of ­your­IVA.

The­level­of ­remortgage­is­restricted­and­should­notusually­take­your­secured­borrowing­above­85%­ofthe­value­of ­your­home.­Any­money­released­from­thiswill­be­used­to­pay­into­the­IVA.

Your­Insolvency­Practitioner­(IP)­will­discuss­this­withyou­in­more­detail­and­will­include­anything­related­tothe­remortgage­when­they­help­you­to­draw­up­theIVA­proposal­to­be­sent­to­your­creditors.

The­role­of ­the­insolvency­practitioner

The­IP­becomes­the­supervisor­of ­the­IVA­after­it­hasbeen­approved.­Their­role­is­to­act­even-handedlybetween­you­(the­debtor)­and­your­creditors­toensure­that­the­terms­of ­the­IVA­are­fulfilled.

Default

If ­you­don’t­keep­to­the­terms­of ­your­IVA­-­forexample,­because­you­miss­your­monthly­payments-­you­may­ask­your­creditors­to­vary­the­terms­of ­your­IVA.­If ­this­is­not­possible­your­IVA­may­be­terminated.

If ­your­IVA­is­terminated,­the­supervisor­may­petitionfor­your­bankruptcy­but­rarely­does­so.­If ­your­IVA­isterminated,­any­costs­of ­your­IVA­will­be­includedwithin­your­total­debt.

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IVAs

Our IVAs

We­can­help­you­set­up­your­IVA­through­our­ownindividual­voluntary­arrangement­company:StepChange­Voluntary­Arrangements.

Realistic­IVA­advice

There­are­many­debt­solutions­available.­We­will­onlyrecommend­an­IVA­if ­it­is­the­most­appropriate­debtsolution­for­you.­Our­debt­advisors­will­look­carefullyat­your­situation­and­circumstances­and­advise­youon­all­the­solutions­available­to­you.

IVA­with­StepChange­Debt­Charity

If ­you­do­decide­to­go­ahead­with­an­IVA,StepChange­Voluntary­Arrangements­can­help­youthrough­the­process.­We­have­our­own­InsolvencyPractitioner­who­can­review­your­finances­and­helpyou­to­put­forward­the­IVA­proposal­to­your­creditors.

Because­our­IVA­recommendations­are­realistic,­thevast­majority­of ­our­proposals­are­accepted­bycreditors.­There­are­no­set-up­fees­to­be­paid­inadvance­of ­your­IVA­being­agreed.­You­will­have­topay­fees­once­your­IVA­is­in­progress,­but­these­willbe­paid­as­part­of ­your­monthly­repayments­towardsyour­debts.­You­are­under­no­obligation­to­take­up­anIVA­with­StepChange­Voluntary­Arrangements.­Wewill­give­you­impartial­and­realistic­advice­aboutwhether­an­IVA­really­is­suitable­for­you­and­cansupport­you­through­the­process.

StepChange­Voluntary­Arrangements­facts

•­Established­in­2007

•­Wholly­owned­by­our­umbrella­charity­–­the­Foundation­for­Credit­Counselling

•­Shares­the­same­ethics­and­values­as­our­charity

•­Over­3,000­StepChange­Voluntary­Arrangementsclients­have­had­their­IVAs­approved­by­creditors

How will an IVA affect me?

We­recommend­that­you­get­some­professional,impartial­advice­before­taking­on­an­IVA,­as­there­areseveral­restrictions­and­obligations­that­you­needto­consider.

•­Suitable­for­those­with­unsecured­debts­and­aregular­sustainable­income­or­for­those­able­to­offera­lump­sum­payment

•­Arranged­by­an­Insolvency­Practitioner­(IP)

•­Your­IVA­proposal­must­be­agreed­by­the­majorityof ­your­creditors­who­vote,­for­it­to­go­ahead

•­Programme­of ­affordable­monthly­contributions­fora­fixed­period;­usually­over­5­or­6­years

•­Sometimes­there­can­be­a­lump­sum­to­pay­insteadof,­or­as­well­as,­making­monthly­payments

•­During­your­IVA,­creditors­cannot­pursue­you­oradd­interest­or­charges­to­your­debt

•­At­the­end­of ­your­IVA,­any­remaining­unsecureddebt­is­written­off

•­Fees­are­payable­but­will­be­taken­from­your­regularmonthly­payments

•­You­may­have­to­release­any­equity­in­your­hometowards­the­end­of ­your­IVA

•­StepChange­Voluntary­Arrangements­can­supportyou­through­every­step­of ­your­IVA

Free debt adviceFree­debt­help­from­StepChange­Debt­Charitycall­0800 138 1111

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IVA guide

Other debt solutions

Everyone’s­situation­is­different­and­it­maybe­that­an­IVA­is­not­suitable­for­yourparticular­debt­problem.

There­are­a­number­of ­other­debt­solutions­available,and­it­is­possible­that­one­of ­these­will­suit­yoursituation­much­better­than­an­IVA.­This­is­why­werecommend­you­get­impartial,­professional­debt­helpto­determine­the­best­solution­for­you.

Our­online­StepChange­Debt­Remedy­tool­can­helpyou­with­this.­In­the­meantime,­this­part­of ­the­guidewill­summarise­some­of ­the­other­debt­solutionsavailable,­including:

•­Debt­management­plan­(DMP)

•­Debt­relief ­order­(DRO)

•­Bankruptcy

Debt management plan (DMP)

A­debt­management­plan­(DMP)­allows­you­to­make­asingle,­affordable­monthly­payment­towards­yourdebts.­A­DMP­is­suitable­for­people­who­have­somemoney­left­over­each­month,­but­don’t­have­enough­tocover­all­their­debt­repayments.

How­does­a­DMP­work?

A­DMP­is­normally­arranged­through­a­third­party.The­third­party­will­work­out­how­much­you­canrealistically­afford­to­pay­towards­your­debts­each­month.

They­will­then­contact­your­creditors­asking­them­toaccept­a­reduced­monthly­payment.­The­third­partywill­also­manage­the­distribution­of ­the­moneybetween­all­your­creditors,­so­that­you­don’t­haveto­deal­with­them.­

How­much­does­a­DMP­cost?

Many­private­debt­management­companies­will­set­up­a­DMP­for­you,­but­will­charge­fees­for­their­services.

There­is­no­need­to­pay­for­a­debt­management­plan.Charities­like­ourselves­can­set­up­your­DMP­free­ofcharge,­with­no­hidden­fees­attached.­We­will­alsomake­sure­that­you­only­pay­what­you­can­afford,­soyou­can­keep­up­with­your­day-to-day­living­costs­as­well.

Free­DMP­advice

If ­you­are­considering­starting­a­DMP,­make­sure­youget­impartial­advice­from­a­debt­management­charity,like­ourselves.­We­can­advise­you­on­whether­a­debtmanagement­plan­is­suitable­for­your­needs.

We­have­a­high­success­rate­with­DMPs­because­we­only­ever­recommend­them­in­the­right­circumstances.

Free anonymous debt adviceFree­debt­help­online­from­StepChange­DebtCharity­at­www.stepchange.org

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Other debt solutions

Debt relief order (DRO)

A­debt­relief ­order­(DRO)­freezes­your­debts­for­12months,­after­which­time­they­are­written­off.

Who­qualifies­for­a­DRO?

To­apply­for­a­DRO­you­must­owe­less­than­£15,000­inunsecured­debts.­You­must­also­have­no­more­than£50­in­available­monthly­income,­in­other­words,­nomore­than­£50­left­each­month­after­paying­youressential­living­expenses.

You­cannot­apply­for­a­DRO­if ­you­are­a­homeowner.DROs­are­also­not­suitable­if ­you­have­assets­that­areworth­more­than­£300,­with­the­exception­of ­one­car,which­can­be­worth­up­to­£1,000.

How­does­a­DRO­work?

You­cannot­apply­for­a­DRO­by­yourself.­A­third­partymust­submit­your­application­to­the­official­receiver.There­is­a­fee­of ­£90­and­this­sum­is­not­refundable­ifyour­application­is­unsuccessful.

You­must­stick­to­the­conditions­of ­your­DRO­for­a­12-month­period.­During­this­time,­your­creditors­cannotpursue­you­for­your­debt­or­add­any­interest­orcharges­to­it.­At­the­end­of ­the­12­months,­as­long­asyou­have­kept­to­the­terms­of ­your­DRO,­your­debt­willbe­written­off.

Free­DRO­help

Our­professional­debt­advisors­will­advise­you­onwhether­a­DRO­is­suitable­for­you.­We­can­talk­youthrough­the­processes­involved­and,­should­youdecide­to­go­ahead,­we­are­one­of ­the­feworganisations­that­can­apply­for­a­DRO­on­your­behalf.

Bankruptcy

Bankruptcy­is­suitable­for­people­who­are­unable­topay­off­their­debts­within­a­reasonable­time.­It’s­a­formof ­insolvency,­so­your­debts­must­be­greater­in­valuethan­the­total­value­of ­any­assets­you­own.

How­does­bankruptcy­work?

Bankruptcy­writes­off­all­your­unsecured­debts,allowing­you­to­make­a­fresh­financial­start.­However,you’ll­be­subject­to­a­number­of ­restrictions­duringthe­term­of ­your­bankruptcy­(usually­12­months).

To­file­for­bankruptcy,­you­must­hand­your­applicationto­the­court­in­triplicate­and­pay­fees­of ­£700:­£175goes­to­the­court­and­£525­to­the­official­receiver.You­may­be­exempt­from­paying­the­court­fee­if ­youreceive­certain­welfare­benefits.

You­may­also­have­to­make­monthly­paymentstowards­your­debts­as­part­of ­an­Income­PaymentAgreement­for­up­to­three­years.

How­could­bankruptcy­affect­me?

Bankruptcy­could­have­significant­consequences­forboth­your­personal­and­professional­life.­You­mayhave­to­sell­your­home­and­there­could­also­be­animpact­on­your­job,­business,­car­and­bank­account.Bankruptcy­will­also­seriously­affect­your­credit­ratingfor­six­years­from­the­date­you­are­made­bankrupt.

Free­bankruptcy­advice

Bankruptcy­is­a­big­step­to­take­with­seriousimplications.­If ­you­are­thinking­about­making­yourselfbankrupt,­talk­to­us­first­and­we­will­help­you­decide­ifit­really­is­the­best­solution­for­you.

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Our debt help

We­know­debt.­We­understand­how­stressfuldebt­problems­can­be.

It’s­important­to­remember­that­you­are­not­alone;millions­of ­people­in­the­UK­are­worried­about­theirdebt­problems.­Each­year­we­help­hundreds­ofthousands­of ­people­with­all­sorts­of ­debt­problems,both­big­and­small.

Act­now

There’s­no­point­burying­your­head­in­the­sand.­Thelonger­you­wait­before­taking­action­to­resolve­yourdebt­problem,­the­worse­it­is­likely­to­get.

Act­now­and­begin­your­journey­towards­becomingdebt­free.­Once­you­have­started­to­tackle­theproblem,­you­will­feel­much­better­and­much­of ­thestress­and­worry­you­have­been­feeling­will­begin­to­reduce.

What­you­can­do

Here­are­some­steps­that­you­can­take­today­to­stopyour­debt­problem­getting­any­worse:

•­Don’t­take­on­any­more­loans,

•­Don’t­consolidate­your­debts­into­a­debtconsolidation­loan­without­getting­advice­from­us­first,

•­Never­secure­any­of ­your­debts­against­your­home,

•­Stop­using­your­credit­cards,­and

•­Seek­some­free,­professional­debt­advice­as­soonas­you­can.

How we can help

If ­you­are­worried­about­your­financialsituation,­it’s­very­important­that­you­get­free,professional­and­impartial­debt­advice­assoon­as­possible.

We­recommend­that­you­consult­a­debt­help­charity,like­ourselves,­to­be­sure­of ­getting­the­realisticadvice­that­you­need.

Every­year­we­help­thousands­of ­people­with­theirdebt­problems.­We­provide­free­debt­help­andimpartial­advice­on­the­best­debt­solutions­availableto­suit­you.

If ­you­would­like­an­instant,­anonymous­assessmentof ­your­situation,­try­StepChange­Debt­Remedy,­ouronline­tool.­StepChange­Debt­Remedy­will­ask­yousome­straightforward­questions­about­your­situationand­you­will­get­a­personal­budget,­tailored­debtadvice­and­a­recommendation­on­the­best­debtsolution­for­you.

Free anonymous debt adviceFree­debt­help­online­from­StepChange­DebtCharity­at­www.stepchange.org

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Our debt help

Contact us

As­the­UK’s­leading­debt­help­charity,­you­can­besure­that­all­our­advice­is­free,­confidentialand­impartial.

StepChange­Debt­Charity­online­advice­

Our­online­StepChange­Debt­Remedy­tool­is­available24­hours­a­day­to­give­you­free,­anonymous­andpersonalised­debt­advice.

StepChange­Debt­Charity­telephone­advice

If ­you­would­prefer­to­talk­to­someone,­please­call­ourfreephone­number:­0800­138­1111*­to­arrange­atelephone­appointment.­Our­lines­are­open­from­8amto­8pm,­Monday­to­Friday­and­Saturday­9am­to­3pm.If ­you­have­hearing­difficulties,­our­free­textphonenumber­is­0800­294­0090.

*­Calls­may­be­recorded­and­monitored­for­qualityand­training­purposes.­Calls­from­mobiles­are­free.

Free debt adviceFree­debt­help­from­StepChange­Debt­Charitycall­0800 138 1111

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