Published in Debt Advice Features on Sunday, March 16 2008

We’ve provided an exhaustive list of common questions that people ask us about the Individual Voluntary Arrangement.  You may well have questions that we haven’t covered, in which case please contact us and we’ll get straight back to you with an answer.

Q. How do I know whether an Individual Voluntary Arrangement is the right option to my debt problem?

A. Open Doors Money is a ‘best advice’ debt solution organisation, this means that we always provide the most appropriate, unbiased advice for your debt problem, and our advice is free and without obligation.

Some debt solution companies promote the solutions that make them the most money, or don’t consider the full range of solutions to debt. Our policy is to always provide the best advice and offer a complete range of solutions.

Q. Is an Individual Voluntary Arrangement the same as Bankruptcy?

A. No, although governed by the court and a legal process for persons with unmanageable debt, an IVA is quite different from Bankruptcy. The main differences are:

• An Individual Voluntary Arrangement does not require that your details be published in the local newspaper.
• The Individual Voluntary Arrangement does not require the sale of your assets, such as your house and car as Bankruptcy does.
• The IVA process does not affect your ability to hold public office and will not affect your professional status.

Q. Why will my lenders agree to an Individual Voluntary Arrangement?

A. Although the letters and calls you may have experienced recently may suggest otherwise, your lenders want to help you with your situation and recover as much of their debt as possible. As long as you communicate honestly with them about your situation, they will understand and will in most cases accept less than what you owe if that is all you can afford and as long as they are satisfied that you will keep to any agreement.

Bankruptcy is costly, time consuming, and a large amount of the money raised from a Bankruptcy will be used to cover professional fees, therefore lenders would in most cases prefer not to resolve the situation in this way.

An Individual Voluntary Arrangement offers the simplicity of a repayment arrangement between yourself and your lenders with legal backing, without the high cost and low returns of a Bankruptcy. The Individual Voluntary Arrangement also offers certain tax benefits for your lenders.

Your lenders will welcome an Individual Voluntary Arrangement where appropriate, as an effective resolution to the situation that you find yourself in.

Q. How long will the Individual Voluntary Arrangement take?

A. The IVA will last for a maximum of 5 years. Some Individual Voluntary Arrangement plans may last for less than 5 years depending on individual financial circumstances.

Q. Will I lose my house if I enter into an Individual Voluntary Arrangement?

A. No, but if you have equity, this will be taken into account, usually at the end of the Individual Voluntary Arrangement. You may then need to release this equity by way of a remortgage depending on your circumstances, however your IVA supervisor will be able to assist with this. If the property is joint-owned, then an appropriate portion of the equity will be taken into consideration.

Q. Will an Individual Voluntary Arrangement affect my employment or professional status?

A. No, an IVA is an arrangement for responsible people who want to deal with their debt problem, and as such you will not prejudice your employment.  However, be aware that your credit rating will be affected and the fact that you are in an IVA will be known to any future employer if you consent to them conducting a credit search on you.

Q. I own a business, will I have to close it?

A. No, unlike Bankruptcy proceedings, you will not have to give up your business or directorship if you enter into an Individual Voluntary Arrangement.

Q. Can anyone find out that I’m in an Individual Voluntary Arrangement?

A. An Individual Voluntary Arrangement is confidential and won’t be publicised.  However, the fact that you are in an Individual Voluntary Arrangement will be noted on your credit file and will be listed on the Insolvency Register.

Q. Which lenders can be included in an Individual Voluntary Arrangement?

A. You can include debt to banks, finance companies, credit or store cards, HM Customs & Excise (VAT), Inland Revenue, and loans made by your friends and family. Debt that cannot be included are mortgage debt, hire purchase, student loans, fines, debt incurred through fraud, maintenance and child support arrears.

Q. Can I enter into an Individual Voluntary Arrangement if a Bankruptcy order has been made against me?

A. If the IVA is more appropriate then it may be possible to annul a Bankruptcy in favour of an Individual Voluntary Arrangement.

Q. Can I enter into an Individual Voluntary Arrangement if I have already received a Statutory Demand?

A. If the IVA is a more appropriate solution than the Statutory Demand, as determined by the official receiver, then an Individual Voluntary Arrangement can be taken in favour.

Q. What will happen if I fail to keep up payments on the Individual Voluntary Arrangement?

A. It is very important that once in an Individual Voluntary Arrangement that monthly payments are made as proposed. If at any point your financial situation changes and the monthly payments are no longer affordable, then you must consult immediately with your Individual Voluntary Arrangement supervisor.

If you don’t keep up payments then your supervisor can initiate Bankruptcy proceedings against you.

Q. What will happen at the end of the Individual Voluntary Arrangement?

A. You will be issued with a ‘Statement of Completion’ usually within 3 months of the final payment. A copy of this will also be sent to the Insolvency Service so that the completion of the Individual Voluntary Arrangement can be recorded.

Q. If I have CCJ’s against me can I enter an Individual Voluntary Arrangement?

A. Yes, you can. Having CCJ’s registered against you does not prohibit you from entering into an IVA.

Q. Does it matter whether I own my property or not?

A. Your status (homeowner, tenant or living with parents) does not matter. If you do own your property it will not be at risk whilst in the IVA (but of course it may be at risk if you don’t resolve your debt problem).

Q. Do I need to notify my partner or family?

A. You can choose not to notify your family, and even your partner, but we would advise that you do inform those that are very close to you.

Q. Is all debt covered by the Individual Voluntary Arrangement?

A. Your Individual Voluntary Arrangement will cover your unsecured debts and arrears, such as unsecured loans, credit cards and rent arrears.

Q. How does secured and unsecured debt differ?

A. Secured debt is secured against assets you own, such as a house or a car. If you fail to keep up repayments on a secured debt your assets may be at risk. Unsecured loans are not secured on any asset.

Q. Do lenders have to accept the terms of the Individual Voluntary Arrangement?

A. The decision whether or not to accept your Individual Voluntary Arrangement proposal is made at a creditors meeting where a vote is made. Alternatively (and more often the case), your lenders can vote by proxy (by post). If 75% in value of your lenders vote to accept the Individual Voluntary Arrangement then it will go ahead.

Q. Can a single lender refuse to accept the Individual Voluntary Arrangement?

A. Yes, but this will only stop the Individual Voluntary Arrangement proceeding if they account for 25% or more in value of your total debt. If they account for less than 25% in value then they will be bound by the terms of the IVA regardless.

Q. Will I be protected from further recovery action, charges and interest?

A. Yes, the Individual Voluntary Arrangement will prevent any further action, including the addition of charges, and all interest will be frozen.

Q. What if my financial situation changes?

A. You will be required to inform your supervisor of any changes in your financial circumstances, good or bad. If your income is reduced, the supervisor can propose a variation on the terms of the Individual Voluntary Arrangement to reflect your new circumstances.

Q. Can an Individual Voluntary Arrangement be cancelled?

A. No, just as your lenders must abide by the terms of the Individual Voluntary Arrangement and accept what has been agreed, you must also keep up repayments as agreed.

Q. How long will it take to set-up an Individual Voluntary Arrangement?

A. The process of preparing the Individual Voluntary Arrangement will begin immediately and is usually set-up and fully in effect within 6 weeks.

Q. Will interest still need to be paid or any recovery action taken whilst waiting for the Individual Voluntary Arrangement to be set-up?

A. Interest will still be incurred, however this will be included within the Individual Voluntary Arrangement once it is approved and wouldn’t affect the payments you would need to make into it.

Q. What will happen if the Individual Voluntary Arrangement is not approved?

A. There are other alternatives to an Individual Voluntary Arrangement if it is not approved, we will be happy to advise the next course of action if the Individual Voluntary Arrangement fails.