Frequently Asked Questions |
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About IVAs
Individual Voluntary
Arrangements
These are formal agreements arranged through a county court to pay off
debts. You pledge to pay a set sum monthly, with payments lasting
between three and five years. Lump sums may also be included in the
settlements. In return, creditors will agree to write off a portion of
the debt. An IVA can be a solution, especially for those with reasonably
high incomes or lump sums to include in a debt. They are arranged
through specialist insolvency practitioners, who will negotiate with
creditors and will handle the monthly payments. If you do not keep up
payments, you can be made bankrupt. You can be debt free in just five
years and have one affordable payment, but there are many factors to be
considered. NOTE that new legislation concerning IVAs is due to come
into force later this year. We'll keep you posted.
The following explanations address the most frequently asked questions.
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● Will I
lose my home?
Usually in an
Individual Voluntary Arrangement the debtor is allowed to keep his house and
continue to pay the mortgage. A re-mortgage of your property is required in
some instances in order to contribute some funds to the Individual Voluntary
Arrangement.
● Will
the Individual Voluntary Arrangement be advertised?
No. Although a
bankruptcy order must be advertised, this is not required in an Individual
Voluntary Arrangement.
● Will
my employer be informed?
No. The
supervisors of your Voluntary Arrangement will not contact your employer
unless required to do so under the terms of the arrangement. If your
employers are amongst your creditors, they will of course be notified.
● What
will happen to my pension?
It depends on the
type of pension that you have. Usually, where you are an employee
contributing to your employer’s pension scheme, the creditors will allow you
to continue to make contributions to the scheme. If you have a personal
pension, then the creditors may insist that all further contributions be
frozen for the duration of the Voluntary Arrangement.
● Where
will the creditors meeting take place?
This is held at a
place convenient for the creditors. A meeting will be called, although it
does not always take place. Creditors rarely attend meetings when called and
vote instead by proxy.
● How
long does it take for a proposal to be prepared?
We expect to have
a proposal prepared and returned to you, after submission to the Insolvency
Practitioner, within 14 working days of receiving completed questionnaire.
Delays can occur if the information requested is not forwarded to us, or is
not complete.
● I
would rather certain creditors were not informed of the proposal and
kept out of the arrangement.
The nominee must
send a copy of the proposal to all known creditors. You cannot pick and
choose whom you pay. If a creditor is to be excluded details must be given
in the proposal and the creditor must agree.
● When
will the meeting of creditors take place?
The meeting will
be called for a date approximately four weeks from when you return the duly
signed proposal and sworn affidavit to the Insolvency Practitioner. This
allows them to forward the paperwork to court, who then return it to the
Insolvency Practitioner. Your creditors will have 14 days in which to
consider the proposal. If 75% of the creditors, in value not number, accept
the proposal it will be binding on the rest.
● How
are the Nominee and Supervisor’s fees paid?
The nominee and
supervisor’s fees are paid out of contributions you make into the Individual
Voluntary Arrangement. Generally you do not have to pay any of these fees in
advance.
● What
happens if my monthly bills increase, or there is a change in my
financial circumstances?
The supervisors
will monitor the level of your income and expenditure throughout the
duration of the Voluntary Arrangement. Such reviews are usually made every
12 months.
● What
if I lose my job or there is a dramatic change in my circumstances?
There is a
provision in the Voluntary Arrangement to call a further meeting of
creditors if this proves necessary. In previous cases, where somebody has
been made redundant or has become seriously ill, the Insolvency Practitioner
has managed to persuade creditors to either extend the period of the
Voluntary Arrangement or, in exceptional circumstances, consider the
Voluntary Arrangement complete. The important thing is that you tell them as
soon as possible when there is a change of circumstances in order that they
can do something about it quickly.
● Will
creditors allow pet insurance/vet bills as part of my regular
monthly expenditure?
Yes. Creditors generally accept this as part of your normal
household expenditure.
● Can
creditors pursue me for the balance of the debts after the
Individual Voluntary Arrangement has finished?
No. The purpose of
the Individual Voluntary Arrangements is to ensure all known creditors are
bound by a full and final settlement.
● I have
a car on finance. What will happen to it? Will the finance company
repossess it?
In most cases your
creditors will allow you to keep a car where it is essential, for example,
to get you to and from your place of work. The proposal will include a
provision that you will continue to pay the finance company their normal
monthly installments. In most cases the finance company will not repossess
the car and will continue to collect the outstanding monthly payment.
● Will
my credit rating be affected?
Yes. All major
credit agencies get a monthly update of all IVAs. They keep a record of the
IVA for at least six years from when it commenced. The important thing is to
properly maintain your IVA with the supervisor.
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About Bankruptcy
This is the ultimate step - the last resort.
It's a legal process that allows you to free yourself from overwhelming
debts and make a fresh start by selling your assets and using the funds
raised to pay your creditors. Any assets, including your home, may be
used to pay creditors.
After a period, usually one year, debts are written off. After your
bankruptcy ends your creditors can make no fresh claims against you, but
if, for example, you have assets remaining that gain in value (such as
your home), your creditors can still force the sale of those assets
within a period of three years. This also applies to any assets you
obtain before becoming discharged.
Although bankruptcy doesn't carry the same social stigma it did a few
years ago, it does bring with it certain restrictions such as your
bankruptcy being advertised in the local press, having your landlord
informed, closure of your bank account, and in certain professions -
including most positions in financial services - a risk of losing your
job.
The bankruptcy remains on your credit file for 6 years.
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About Bankruptcy Annulment
A bankruptcy order can be annulled by the
court if
(1) You have repaid your debts and bankruptcy expenses in full, or
(2) You have provided full security to pledge to guarantee the debts,
or
(3) You should not have been made bankrupt at the time the original
bankruptcy order was created, or
(4) A creditors' meeting has approved an IVA proposal.
Even if you have been made bankrupt and have been discharged after 12
months, it is often in your interests to at least enquire whether this
could be an option for you - the reasons being:
- Even when a bankrupt has been discharged after 12 months, if a
trustee has been appointed then fees continue to accumulate and this can
lead to the loss of your home and any saleable assets.
- Assets which you obtain before you become discharged will still be
controlled by the trustee, who can deal with them at any time up to 3
years in the future.
- The bankruptcy remains on your credit file for 6 years
- Bank accounts are difficult to obtain
- You will not be able to obtain credit for £500 or more from any
person without first telling them that you are bankrupt.
To see whether you would qualify for a Bankruptcy Annulment, please fill
in the enquiry form so
that an expert in this field can assess whether a successful annulment
is possible for you..
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About Debt Consolidation
Debt consolidation can be done in a number of
ways and depends on your current residential status.
Two of the options are: unsecured loan and secured loan. You should
always seek professional advice before pursuing the secured loan option
as your home may be put at risk if you do not keep up the repayments.
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Secured loan or remortgage - which is better?
This is down to individual choice. Mortgage rates are usually lower and
setup fees higher than those of loans, because of the length of time
involved. However, most of the costs can be incorporated in the loan. A
mortgage and secured loans are secured on your home and therefore your home
will be at risk in either case if you cannot meet the repayments.
● Will a
consolidation loan help me?
If you can consolidate all of your existing debts into a loan that offers
lower total repayments, then this could be the best solution. You would save
money in the long run and avoid more drastic solutions.
However, many people who are experiencing serious financial difficulties
tend to have poor credit rating and therefore a low interest rate would not
be offered. If this is the case then taking on more financial responsibility
is likely to make your situation worse.
● Can I
remortgage if I have a fixed / discounted mortgage?
Yes, but you will normally have to pay an early settlement charge to your
lender. If your settlement charge is high it might be best to opt for a
secured loan until the fixed period has ended.
● How
long does the process take?
Remortgages normally take approximately 8 weeks and secured loans
approximately 3 weeks.
● Are
there any up front fees?
Not on Secured loans. A remortgage application could have additional costs,
for example conveyancing, and sometimes an application fee may apply. It
would be wise to speak to an advisor before deciding on which option to
take,
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About Debt Management
Debt Management Programs
These are voluntary agreements with creditors to repay debts over an
extended period. They constitute an arrangement between yourself and a
Debt Management company who agree to supervise and distribute your debt
repayments. They take a payment each month and split it between your
creditors.
It is sometimes possible to restructure repayments into a more
convenient plan and you would therefore not have to sell your home as
part of the agreement.
Interest charges can sometimes be stopped, and Debt Management companies
may or may not charge a fee for their services. The Debt Advice
Network would always endeavour to recommend non-fee-charging debt
management companies.
Debt Management usually works best for those with at least three
creditors, debts of £5,000 or more and at least £100 a month of free
income to help settle the debts.
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About Full & Final Settlement
Full and Final Settlement
Full and final settlement is the process of asking creditors to accept a
lump sum which is less than the full balance owed on the debt, and in
return for having a lump sum payment, the creditors agree to write off
the rest of the debts. They also agree in writing to change your credit
reference file details to show that the balance is “satisfied”.
The lump sum payment is often determined by a combination of disposable
income and the level of equity you have in your property. Or perhaps a
family member is offering to settle the debt for you...
Full and Final is not guaranteed. The creditor may refuse an offer.
If they do refuse, there are a number of options available for you to
proceed..
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Your Personal Credit History
Each time you apply for credit, whether it be
a credit card, small loan or mortgage, the company in question will do a
credit search on you. The result will show them whether you are a good
risk, moderate risk or bad risk. Only you, and with your permission,
suppliers of credit and the agencies acting for them, will have access
to this information.
Each month your creditors send information about your payment history
for that month to credit agencies, and this information builds a profile
of your creditworthiness.
The main UK agencies are:
1. Experion
2. Equifax
3. Callcredit
All can be requested on-line, and the report will be either instantly
accessible or will be sent to your home address, depending on which
agency you use. However, not all creditors send information to all three
agencies. They may, for example, send it to Experion and not to Equifax.
The effect of this from your point of view is that a report from one
agency may not mirror exactly a report from another agency.
Therefore, in order to see exactly what you owe, to whom, and a complete
payment history, it is advisable to obtain a report from all three
agencies.
You can obtain a report which will contain information that is held by
all three agencies from www.CHECHMYFILE.com.
This will provide you with a comprehensive list of your creditors, the
original start dates of loans, and the outstanding balances.
In order to protect your identity and to ensure that the person
requesting the report is actually you, Checkmyfile will send you a PIN
addressed to you at your home address within two working days. Once
received, you will be able to access your credit file.
Needless to say, they do make a small charge for this service, but in
relation to what you ultimately want to achieve, the cost is minimal
and the money well spent.
Our advisors will need this information in order to negotiate with your
creditors, and it will save you valuable time if you have the
information readily to hand.
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Your Rights and Responsibilities
UNDER CONSTRUCTION
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expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi
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Other Organisations & Contacts
UNDER CONSTRUCTION
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provident, similique sunt in culpa qui officia deserunt mollitia animi,
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expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi
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possimus, omnis voluptas assumenda est, omnis dolor repellendus.
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necessitatibus saepe eveniet ut et voluptates repudiandae sint et
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