An Individual Voluntary Arrangement (IVA) is a debt solution which involves yourself and your creditors coming to a legally binding agreement to extend your loan term and make reduced monthly repayments over this new timeframe.
Whilst an IVA can provide you with a flexible option to address your debt and alleviate the financial strain of debt in the short term, they nevertheless come with a number of dangers which need to be carefully considered.
The following paragraphs will explain how an IVA will affect your work, properties and belongings.
Usually, an IVA will not impact your employment. However, there are specific occupations, such as lawyers and accountants, which are bound to a code of practice which prohibits them from using either bankruptcy or an IVA whilst working in the profession. If you are apprehensive about the affect your IVA will have on your work, evaluate the code of conduct and conditions that are in your employment contract so that you can ascertain whether there are any clauses and potential ramifications that will occur if you acquire an IVA.
Your belongings which are essential to your day-to-day living will not be included in your IVA. This includes your furniture, kitchenware and computer.
However, whilst there is no legal impetus on you to do so, you might decide to sell off some of belongings which have a high re-sale value, such as antiquities and paintings, in order to contribute towards the repayment of part of your creditor debt.
There are no specific asset requirements you will need to meet in order to set up an IVA, though you might decide to include some of your more valuable assets in your IVA in order to use to them to reduce the amount of money you owe. If you decided to use any of your assets in your IVA, then you would usually have to sell them off and utilise the money to repay part of your creditor debt.
If you’re a property owner, then you might be asked by your insolvency practitioner to obtain a valuation of your home during the last year of your IVA, so that they can ascertain whether there is any equity in it. If they believe that there is, then you will be asked to remortgage your home and use the money from doing so to repay your creditors.
If you choose to use an IVA, then your presiding insolvency practitioner will talk to you about what you want to do with your assets, and should give you an indication of whether it is better to sell certain ones or keep them out of the agreement. Remember, you are legally obliged to notify your insolvency practitioner about every single one of your assets, and a failure to do so will constitute a breakage of the law.
All assets that you wish to retain need to be manually excluded from your agreement. However, your insolvency practitioner will identify whether leaving out a certain asset you own from your IVA will undermine your chances of acquiring the majority approval necessary to set it up.
Future income or assets
If your income improves significantly whilst you are on an IVA, or you unexpectedly receive a valuable asset, then you might have to alter your IVA agreement accordingly to reflect this improvement in your financial situation. This means that if you sold your car whilst you are on an IVA, then you might be asked to pay the money you acquire from this sale into your IVA.
Similarly, if you receive raise in your salary whilst on an IVA, then you are legally obliged to notify your insolvency practitioner immediately, otherwise you might be deemed to be breaking the law.
If you receive a sudden and unscheduled sum of money, then you will likely have to pay some or all of it into your IVA. This is because the majority of IVA agreements have a windfall clause attached within them. This clause obligates you to pay money into your IVA if you suddenly come into some money; this could be through inheritance, a scratch card of anything along these lines.
If you are aware that you stand to obtain a large inheritance or a lump sum of money from a relative in the next six years, then it is advised that you reconsider taking out an IVA, because there might be better suited debt solutions to your situation.
Deciding on an IVA
- How does an IVA work?
- Which debts can I include?
- How much does an IVA cost to set up?
- Income and Asset Requirements
- How an IVA will affect homeowners
- How an IVA will affect your bank accounts and pension
- How an IVA will affect your credit rating
- How an IVA will affect your work, home and assets
- The lasting power of attorney
- Is an IVA the right solution for me?