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Your IVA & Insolvency questions answered

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a solution that’s designed to help people repay their debts at a rate they can afford. It is a legally binding agreement between you and your lenders and providing you keep to the terms of the IVA, lenders will agree to write off any remaining debts that still exist at the end of the IVA period, which typically lasts for 5 years.

Interest and charges will be frozen and lenders will no longer be able to contact you or petition for your Bankruptcy.

Does an IVA cover all of my debts?

No, only unsecured debts – debts that are not secured against your property or something you own – can be included in an IVA.

These would include debts such as credit cards, overdrafts, personal loans, payday loans, store cards and catalogue accounts.

What debts are included and excluded from an IVA?

Secured debts such as mortgages, hire purchase loans, secured loans, social funds and crisis loans cannot be included in an IVA.
Student loans, household bills, TV licence and child maintenance are also excluded from an IVA.

Rest assured that a full financial review will be carried out with you at the start of the IVA process to ensure you have enough money to pay these bills every month before your new debt repayment towards unsecured debts is calculated. Repayments will be based on expenditure guidelines that have been put into place to ensure you can maintain a reasonable standard of living.

Debts that can be included in an IVA are unsecured debts, these are debts that are not secured against something you own, so debts such as personal loans, store cards, overdrafts, credit cards, payday loans and catalogue accounts for example.

How long does it take to set up the IVA?

Once you have provided all the information we need, your case will be transferred to an Insolvency Practitioner for further assessment. The Insolvency Practitioner will draft a repayment proposal and will negotiate with you lenders.

The time this takes can vary, but normally, the IVA process typically takes between 6 and 8 weeks.

How long will the IVA last?

Providing you keep to the terms of the IVA, the Arrangement will typically last for 5 years.

How much does an IVA cost?

To see specific breakdown of our fee structure for all of our services, please take a look at our ‘what we charge and why’ page.

All costs associated with your IVA are included in the payments you make in to it every month. Your Insolvency Practitioner will tell you what these specific fees are before you commit to an IVA.

To proceed with the Baines & Ernst IVA Advisory Service, you will need to pay the IVA Advisory Service fee, which will be retained by us. This fee covers the financial review and advice, the initial administration, the home representative visit along with file collection and delivery to a licensed Insolvency Practitioner. This fee is the equivalent to two months disposable income and is calculated from the information provided at the application stage.

How are the Insolvency Practitioner’s fees collected?

The Insolvency Practitioner’s fees are collected from the payments you make into the IVA and you will be notified of these fees before the IVA starts.

Will interest and other charges be frozen while the IVA is being set up?

Interest and charges are frozen once the IVA starts – not during the set up of the IVA.

Will an IVA prevent my lenders taking further recovery action?

Yes. Once the IVA is in place, you are protected from all further recovery action by your unsecured lenders – providing you keep to the terms of the arrangement.

If a lender tries to take further action while the IVA is being set up, you can apply to the courts for an Interim Order to stop this until you know the outcome of your application.

Is an IVA a loan?

An IVA is not a loan – it is a legal process whereby you can agree with your lenders to repay them what you can afford over a fixed period of time which typically lasts for 5 years.

Will I be credit checked before acceptance?

As we are not lending you money, you will not need to be credit checked to qualify for an IVA.

Do lenders have to accept an IVA?

Once we have all the details regarding your financial circumstances, your case will be transferred to an Insolvency Practitioner for further assessment.

Based on this information, the Insolvency Practitioner will draft a proposal which will be presented to your lenders.

For an IVA to be approved and interest and charges to be frozen, the proposal will need to be voted on and approved by lenders representing 75% of the value of your debts.

If 75% approval is not obtained, then the IVA proposal will fail.

Can an individual lender refuse to accept an IVA?

Yes, but if lenders holding 75% worth of the debts vote in favour of the IVA, then all lenders are bound by law to accept the arrangement.

Do I have to be in full time employment?

No – we will carry out a financial review to find out if an IVA is the right solution for you first, and this is what the decision is based on, not whether you are in full time employment, self employed or working part time.

Our financial reviews are under no obligation, so if you’re interested in finding out whether it would be the best way for you to deal with your debts, please contact us; we’ll be happy to help.

Does it make a difference if I am a homeowner or tenant?

No. It makes no difference whether you are a tenant or homeowner or even if you are still living with your parents.

If I am a homeowner, will I have to release equity from my home into the IVA?

You could be asked to release equity from your home to help repay your lenders in the 4th year of the IVA.

If you have to remortgage your home to release equity from your property, you could find it hard to secure a mortgage with a lender because you have been involved in a debt repayment arrangement. In this case, your IVA could be extended for another year depending on the amount of debt that is owed – but this will all be discussed with you prior to starting the IVA.

Do I have to tell my partner?

It is advisable that you tell your partner if you are entering into an IVA. If you live with your partner, their income may be factored into the expenditure details.

Will an IVA affect my credit rating?

If you have already made late payments towards your debts or missed them altogether, then your credit rating could already be affected.

If you enter an IVA, you will not be repaying the amount originally agreed with your lenders, which means your credit rating will be affected for six years from the start of the Arrangement. Once all your debts are cleared, you will be able to focus on rebuilding your credit rating once again.

Can I cancel the IVA once it is set up?

There is a cooling off period of 14 calendar days from when the signed and returned documentation has been received, in which time you can cancel the IVA.

However, once the IVA begins, you cannot cancel the IVA as it is a legally binding agreement. If there are changes to your financial situation, you should speak to your Insolvency Practitioner who will be able to advise you on what to do next.

What happens if I just stop paying into the IVA?

If you fail to keep to the Arrangement and the IVA falls so much into arrears that nothing can be done to bring it back on track, then the IVA Supervisor will issue a Notice of Termination. This will formally bring an end to the IVA.

If the IVA fails then the lenders will be able to chase you for the remaining debt, as you will no longer have the protection afforded to you by the IVA. There is also the risk that lenders or the Insolvency Practitioner could petition for your Bankruptcy.

What happens if the IVA is not approved?

If the IVA is not approved we will do all we can to help you find an alternative solution, such as a Debt Management Plan.

What if my circumstances change?

If you are unable to maintain repayments because of a change in circumstances, contact your Insolvency Practitioner straightaway so that they can help you.

How do I contact Baines & Ernst?

Getting in touch with us is easy – simply call us on the number at the top of the screen or complete the enquiry form and a member of our team will call you back.

If you are an existing customer and would like the Baines & Ernst customer services number, please visit our contact us page.

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