Tuesday, 18 August 2009

50 top tips about IVAs and Debt Management Plans

posted by debts.org at 23:09

If you are suffering serious debt problems, and a debt management plan will not work for you, seek advice about an Individual Voluntary Arrangement (IVA) which can solve your long term debt problems forever.



1. What is an IVA?


An IVA is an Individual Voluntary Arrangement, and is formal agreement between the debtor and the creditors. An IVA has to be set up by a licensed insolvency practitioner, and will normally leave you debt-free after five years.


2. What are the IVA guidelines?


To consider an IVA you must be resident in England, Wales or Northern Ireland, and you must have debt problems. You must have a regular income, debts of over £15,000 (you can arrange a debt management plan if your debts are less), and you must be able to keep up the new repayments that will be arranged with your creditors.


3. Advantages of an IVA


An IVA is private, so family and friends don´t need to know about it. After five years you will be debt-free. An IVA acts as a safeguard against losing your home and you can write off up to 75% of your debt. The costs of an IVA are lower than a bankruptcy and you only pay back what you can afford.


4. Disadvantages of an IVA


An IVA normally lasts 5 years, whereas bankruptcy is only one year. The insolvency practitioner may request some equity release from your property. You must be able to pay at least £200 per month, and you must have at least 3 creditors and at least £15,000 of debt. An IVA is legally binding and it will show up on your credit report for up to 6 years.


5. How an IVA works for you and your creditors


Speak to a regulated debt solutions company to discuss your suitability for an IVA. The IVA must offer a higher return to creditors than could otherwise be expected if you were made bankrupt. You must make an honest declaration of your assets and anticipated future earnings. False declarations will result in the IVA application failing. Serious debt problems can be solved, but you have to be honest.


6. Who can apply for an IVA?


Anyone can apply for an IVA if they are suffering debt problems which can´t be covered by a debt management plan, and if their debts could result in the loss of their home if they are declared bankrupt. IVAs are particularly useful to people whose creditors will not accept a more informal debt management plan.


7. The IVA process


If you are interested in learning more about an IVA, contact a reputable debt solutions company and they will assess whether an IVA is right for you. An alternative can always be suggested such as a debt management plan or bankruptcy. You will then come to an agreement about how much you can pay monthly to each creditor. The debt advice company will then make an application to the court for an Interim Order, which means your creditors cannot take any action against you. If 75% of your creditors agree with the proposals then the agreement becomes legally binding.


8. Late IVA payments


If you think an IVA payment will be late for any reason, let the supervisor of the IVA know straight away. If you have a valid reason for late payment, you may be able to delay the payment, but don´t make a habit of it. If payments regularly late, you could end up facing bankruptcy.


9. Can I pay back my IVA early?


It is possible to pay off your IVA early, but you need agreement from the creditors. However they will base an early settlement payment on the actual amount outstanding and not on the reduced rate you would have paid back if the IVA continued to the full term agreed.


10. How can I arrange an early payment agreement?


In order to eliminate your debt early, your IVA supervisor will have to call a meeting of all the creditors, known as a variation meeting. Once agreement has been reached, a new financial statement will be drawn up. Big debt problems can reduce significantly if you find yourself in a new job or you receive funds from a house sale.


11. Why would I change the terms of my IVA?



Nobody has a crystal ball to look into the future. Your circumstances can change for the better or for the worse after you have agreed the terms and conditions of your IVA. You may get made redundant or you may find a new highly paid job, or be left some money. Contact the supervisor of your IVA to discuss the changes.


12. What happens if an IVA Variation Process is rejected

If an IVA Variation Process is rejected by creditors, you need to try and keep up the repayments on the original agreement. If you are struggling to do this, speak to the IVA supervisor to see if there is any alternative. If not, the IVA could fail.


13. What is an IVA Notice of Breach?


If you fail to abide by the terms and conditions of the original IVA agreement you signed, the IVA supervisor will issue a Notice of Breach to you. You will be advised to find a solution for the breach within one month, and you will be required to explain why the breach occurred. If you cannot sort out your debt, and remedy the breach, the IVA could be failed and bankruptcy proceedings could begin.


14. How does an IVA finish?


An IVA ends when you make the last payment as per the IVA agreement. Steps will be taken to ensure all payments have cleared before a certificate of completion can be issued, and is normally within 3 months of the last payment. Help for debt is closer than you think, and there is no need to feel isolated or alone with your debt problems.


15. What happens if I don´t include all my debts in the IVA?


Failure to include all of your unsecured debts in the IVA agreement, means you could still be chased for money when the IVA term is over. The creditor who is owed money has the right to take legal action against you so make sure you include all debts at the beginning of the IVA.


16. What is the difference between an IVA and a Debt Management Plan?


Unlike a debt management plan, an IVA is a formal agreement which arrange for the payment of dividends to your creditors (usually annually) and not monthly repayments. An IVA supervisor distributes the funds each year, taking his fees out. Once all the funds have been paid out of the IVA account, the account will be closed.


17. Does the money in an IVA account earn interest?


Interest is applied to the funds in the IVA account, and the extra money is paid over to the creditors to increase their dividends.


18. What paperwork do I get when the IVA completes?


A certificate of completion will be issued once the IVA has been completed and that will be a signal for the creditors to write off any outstanding debt. The credit reference agencies, the court service and the Department of Trade and Industry will also be informed.


19. Why would an IVA fail?


An IVA can fail for a wide range of reasons. A change of circumstances can mean you no longer have any surplus income or less income than you originally agreed to pay. The IVA supervisor is there to help you with any problems, and a Notice of Breach will only be issued if the IVA falls into arrears.


20. What is the effect of an IVA failing?


If an IVA falls into arrears and you can´t catch up with the payments, an Notice of Termination will be issued by the IVA Supervisor. This will formally bring the IVA to an end and the creditors can chase you for the remaining debt, which no longer carries the protection of the IVA.


21. Who pays for the IVA?


You and the creditors pay for an IVA, and the IVA costs are taken from the money paid by the person in debt, and reduced from the money sent to the creditors. If you are suffering big debt problems or you need UK debts help, make sure you contact a regulated debt solutions company for free debt help and advice.


22. Who contacts my creditors?


The debt management company or debt solutions company in the UK you appoint to arrange your IVA will speak directly to your creditors. Once the IVA has been approved your creditors will never bother you again, as long as the debt repayments are kept up.


23. How can I boost my credit rating after an IVA?


Make sure you pay your IVA repayments on time every time. Get to know what your credit rating is by applying for a free credit report, and check if for errors. Separate your credit file from anyone else´s in the family who may have the same name, and don´t apply for too much credit or your credit report will show footprints which can be seen by other creditors.


24. Why an IVA and not bankruptcy?


An IVA will stop all interest on the debt, and you can usually keep your property. You will be completely out of debt in 5 years and you keep control of your assets. You will not be hampered by restrictions when you want to progress your career and an IVA is easier on your credit rating than bankruptcy. It is also easier to open a current bank account following an IVA.


25. An IVA or debt consolidation


You can seek free advice about IVA, bankruptcy and debt consolidation from a debt advice company in the UK. Debt consolidation loans mean that all your debts will be lumped together and you will just pay back one amount each month. This type of loan may work better for you than an IVA, as with an IVA your assets are scrutinised. Also, employment status is not affected at all with a debt consolidation plan. Seek free debt advice to help you decide what is best for you, and how you can achieve a debt-free future.


26. Beware misleading IVA adverts


Often advertised as a popular alternative to bankruptcy, and IVA is never the less a serious arrangement. Many IVA adverts conveniently forget to mention that if an IVA fails you could still face bankruptcy, your credit rating will be affected for up to 6 years, and you could face dire consequences if the IVA fails. They may also tell you that 95% of your debt can be written off with an IVA whereas 60-70% is much more likely.


27. Why do so many firms advertise IVAs?


Particularly since the credit crunch and recession in the UK, firms offering IVAs seem to have popped up all over the place. If you have serious debt problems, and you are promised that 75% of your debts will be written off, the idea of an IVA may be appealing. But make sure you only use regulated companies to deal with your debt problems in the UK.


28. What to do before you start an IVA


Make sure you fully understand the terms and conditions of the IVA and be aware that you will have to budget for 60 months to make sure you don´t miss any payments. If you own your own home, but are suffering big debt problems, you may need to sell or remortgage your home in order to make the monthly payments. Read about any disadvantages of IVAs which may affect you and your family.


29. Will the creditors contact me during the IVA period?


Legally creditors can still contact you directly but they are more likely to contact the IVA insolvency practitioner if they need to. Creditors should stop all contact with you directly, and if you receive any mail from them you should be able to forward it on to the insolvency practitioner.


30. How do I know if a debt management plan is right for me?


A debt management plan (DMP) is suitable for anyone who has unsecured debts that they cannot repay, and also for people who have lots of equity in their homes but who don´t want to take a second mortgage. A DMP can also be ideal to help solve your debt problems if the debt is less than £12,000.


31. Advantages of a debt management plan


Your debt management company will deal with your creditors on your behalf, and you only make one payment each month which is distributed to your creditors for you. All interest and charges are normally stopped and you only pay what you can afford to. A DMP is an informal agreement which can be changed if you and your creditors are in agreement.


32. Disadvantages of a debt management plan


Debt management plans only deal with unsecured loans such as credit cards and unsecured bank loans. You may still have to deal with priority debts yourself. Debt management plans are not legally enforceable, but if you have high debts and low repayments, you could end up paying off your creditors for years to come, when the aim is to get debt free as soon as possible.


33. Is a debt management plan a loan?


A debt management plan is not a loan, it simply places your debts with a third party so you don´t have to deal with your creditors, and reduces your monthly payments. There are no credit checks to pass in order for you to clear debts, and you need to beware of any unregulated loans.


34. How long will my debt management plan last?


The length of the debt management plan depends on how much debt you are in. If you are worried about debt problems, contact your creditors and ask them if they can help you. Lenders are much more likely to be sympathetic if you approach them first.


35. How much does a debt management plan cost?


It depends which debt management company you talk to. Some will charge a one off fee at the beginning of the debt management plan, and some will be paid commission from your creditors.


36. Advantages of using a debt management company


Although you can try to arrange a debt management plan yourself, your creditors are much more likely to listen to a regulated debt advice company who will present your case clearly and professionally.


37. How much money actually goes to my creditors

With a debt management plan, you only pay what you can afford. Take away your outgoings from your income and see what is left. A percentage of this will probably go to the debt advice company and the rest to your creditors in monthly payments. Never borrow more money to pay off your debts, unless you are advised to take a debt consolidation loan.


38. How do I make debt management plan payments?


You can pay your debt management plan payments by standing order from your account or you can pay by cheque or paying-in slip at the bank or building society.


39. Can I stop a debt management plan?


You can stop or start a debt management plan but you must inform your debt management company who will, in turn inform your creditors.


40. Do my creditors have to accept a debt management plan?


No, creditors are not obliged to agree with the terms and conditions of any proposed debt management plan, but they usually will if it is to their advantage, and they will be getting some of the overall debt paid back. They are more likely to agree to it when they are approached by a professional debt advice company in the UK than from an individual.


41. How will a debt management plan affect my credit rating?


If you are on a debt management plan it is likely to be noted on your credit report. This does not necessarily stop you getting more credit, but your lenders may have made it a condition when they agreed to the DMP that you don´t apply for any more credit until the DMP is paid off.


42. Will I be sent a monthly report if I am on a debt management plan?


A monthly report should be arranged for you through your debt management company, to show the payments, amount still owing, etc., If you are suffering debt problems and you need debt help, contact a regulated debt solutions company in the UK today.


43. Can I get additional debt help and advice in the UK?


If you are working your way through a debt management plan, feel free to contact your debt counsellor in the UK for any additional support, debt help or debt advice which you may need. The debt counsellor will be only too happy to provide you with free debt advice.


44. Can I apply for a credit card while I am on a debt management plan?


Unless your creditors have stated otherwise, there is nothing legally to stop you applying for a credit card while you are on a debt management plan but think hard about the consequences first. Why take action to clear your debts, only to get yourself in more serious debt with a credit card? Look upon the debt management plan as being the first step to a debt-free future for you and your family.


45. Do I have to keep paying interest and bank charges?


Once the debt management plan is set up, and your debt advice company has spoken to your creditors, interest and bank charges should stop, depending on your personal debt situation.

46. Can I put include my secure loans in a debt management plan?


Loans which are secured against something, such as a mortgage or a car loan cannot be included in a debt management plan. If you are falling behind with secure loan repayments contact a debt help company in the UK for free advice and guidance, and never ignore letters from your creditors.


47. Can I lose my house if I am already on a debt management plan?


If you are already on a debt management plan but are suffering mortgage arrears or more serious debt problems as well, you need to contact your mortgage lender as soon as possible to discuss how to eliminate your debts.


48. What debts can I include in a debt management plan?


You can include unsecured debts in a debt management plan including student loans, store card debts, credit card debts, personal loans and overdrafts. Secured loans such as mortgages and car loans cannot be included in a debt management plan.


49. Only use regulated debt help companies


If you are considering an IVA, bankruptcy or a debt management plan, digest all the information from a regulated debt solutions company, and don´t be fobbed off with a plan that does not suit you. Free debt advice in the UK is readily available and if you are suffering big debt problems, you can get help today.


50. Don´t bury your head in the sand


If you are starting to experience debt problems which are not yet serious debt problems, contact a debt counsellor or a debt advice company who can help keep your debts to a minimum and give you free debt advice and help. Never ignore letters from your creditors, and seek debt help as soon as you can. There is no longer any stigma attached to being in debt, and you should never feel awkward or embarrassed to call a debt advice company. Remember, they have heard it all before, and they are in the best position to give you free advice.

Labels: , , ,

0 Comments