Qualifying For An IVA Criteria

To qualify for an IVA (Individual Voluntary Arrangement), you must meet certain criteria:

  1. You must have at least two debts that you are struggling to repay.
  2. You must owe a minimum of £6,000 in total to your creditors.
  3. You must have a regular income that allows you to make monthly payments towards your debts.
  4. You must be a resident of England, Wales or Northern Ireland.
  5. You must be insolvent, meaning that your debts exceed your assets and you are unable to pay your debts as they fall due.

If you meet these criteria, you can contact an Insolvency Practitioner (IP) who will assess your financial situation and advise you on whether an IVA is suitable for you. The IP will also help you to set up the IVA and will act as a supervisor throughout its duration.

What If I Am A Homeowner?

Yes, you can do an IVA if you are a homeowner. However, being a homeowner may affect the terms of your IVA, and it is important to understand how it could impact you before entering into the arrangement.

If you have equity in your home, meaning that its value exceeds the amount of your outstanding mortgage, you may be required to release some of that equity to pay off your creditors as part of the IVA agreement. This could be done by remortgaging or by selling your home, but it is important to note that you will usually be allowed to keep a certain amount of equity to ensure that you have a reasonable standard of living.

It is also important to note that if you are in arrears on your mortgage payments, an IVA may not be the best option for you. In this case, you should seek professional advice from an Insolvency Practitioner or a debt advisor to explore alternative debt solutions that may better suit your circumstances.

Can I Do An IVA If I Am Unemployed

To qualify for an IVA, you must have a regular income that is sufficient to make monthly payments towards your debts. If you are unemployed, you may not have a regular income, which could make it difficult to meet this requirement. However, if you have other sources of income, such as from a pension or benefits, this may be sufficient to meet the criteria.

It is also important to note that an IVA is a legally binding agreement that requires you to make regular payments towards your debts for a period of typically five to six years. If you are unemployed, there is a risk that you may not be able to make these payments consistently over the duration of the IVA, which could lead to its failure.

What If I Live Abroad

It may be possible to do an IVA if you live abroad, but it would depend on your individual circumstances and the terms of the IVA agreement.

To qualify for an IVA, you must owe at least £6,000 to two or more creditors and be a resident of England, Wales or Northern Ireland. If you live abroad, you may not meet the residency requirement, which could make it difficult to enter into an IVA in the UK.

However, it is still possible to enter into an IVA if you are a UK citizen and have debts with UK creditors, even if you live abroad. In this case, you would need to work with an Insolvency Practitioner who is licensed to act in the UK and can help you set up an IVA remotely.

It is important to note that if you do enter into an IVA while living abroad, you will need to make regular payments towards your debts and communicate with your Insolvency Practitioner regularly. This may be more difficult to do if you are in a different time zone or if you do not have access to reliable communication channels.

Is It Possible To Do A Joint IVA ?

A joint IVA is suitable for couples or business partners who have joint debts and are struggling to repay them.

Yes, it is possible to apply for a joint IVA (Individual Voluntary Arrangement) with another person. A joint IVA is suitable for couples or business partners who have joint debts and are struggling to repay them.

A joint IVA allows both parties to consolidate their debts into one affordable monthly payment, which is distributed among their creditors. The terms of the IVA agreement are binding on both parties, and they are jointly responsible for fulfilling the obligations of the IVA.

It is important to note that both parties need to meet the eligibility criteria for an IVA, and their financial circumstances will be assessed together to determine the suitability of a joint IVA. You should consult with an IVA advisor to see if a joint IVA is the right solution for your situation.

To apply for a joint IVA (Individual Voluntary Arrangement), you will need to follow these steps:

  1. Seek Professional Advice: Contact an IVA company who can advise you on the suitability of a joint IVA. They  will assess your financial circumstances and determine if a joint IVA is the right solution for your situation.
  2. Gather Information: Collect all the necessary information, including your personal and financial details, and those of your joint applicant (if applicable), such as debts, assets, income, and expenditure.
  3. Discuss the Terms: If a joint IVA is deemed suitable, the IVA company will discuss the terms of the IVA with you and your joint applicant, including the monthly repayment amount and the duration of the IVA.
  4. Create a Proposal: The Insolvency Practitioner will create a proposal outlining the terms of the joint IVA and present it to your creditors for approval.
  5. Agree with the Creditors: If the creditors agree to the terms of the IVA proposal, it becomes legally binding on all parties, and you will make regular payments to the IP for distribution to your creditors.
  6. Fulfil the Obligations: You and your joint applicant will be responsible for fulfilling the obligations of the IVA, which may include making monthly payments, providing regular financial information to the IP, and adhering to other conditions outlined in the IVA.

It is important to note that a joint IVA is a significant financial commitment, and failure to adhere to the terms of the IVA could result in bankruptcy. Therefore, it is crucial to consult with a Debt advisor before making any decisions about entering into a joint IVA

Is An IVA Better Than Bankruptcy

Whether an Individual Voluntary Arrangement (IVA) is better than bankruptcy depends on your specific financial circumstances and goals.

An IVA is a legally binding agreement between you and your creditors to pay off your debts over a set period of time. It allows you to avoid bankruptcy and keep your assets, such as your home, provided you keep up with the payments. IVAs typically last for five to six years and any remaining debt is written off at the end of the term.

Bankruptcy, on the other hand, is a legal process that can be a quicker way to get rid of your debts, but it can also come with more severe consequences. Bankruptcy can lead to the loss of assets, including your home, and can affect your credit rating for several years.

So, if your main concern is protecting your assets and avoiding the long-term impact on your credit rating, an IVA may be a better option. However, if you have few or no assets to protect and need a fresh start as soon as possible, bankruptcy may be a better option.

It’s important to note that both options come with advantages and disadvantages, and you should seek professional advice from a debt advisor or insolvency practitioner to help you decide which option is best for you.

What If I Am A Homeowner?

On the one hand, bankruptcy can provide relief from debt and stop any legal action against you, including repossession or foreclosure proceedings on your home. However, depending on the value of your home and the amount of equity you have in it, you may be required to sell it as part of the bankruptcy process to pay off your creditors.

Additionally, bankruptcy can have a significant impact on your credit score and remain on your credit report for up to ten years, which can make it more difficult to obtain credit or loans in the future.

If you’re considering bankruptcy and are a homeowner, you may want to explore other options such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) before making a final decision.

An IVA may allow you to keep your home and make manageable payments towards your debts over a set period of time. A DMP can also help you repay your debts over time, but without the legal protection of an IVA or bankruptcy.

How Long Does Bankruptcy Take To Clear My Debts?

Bankruptcy usually lasts for a period of 12 months, after which most of your unsecured debts are discharged. However, it’s important to note that some debts, such as student loans, court fines, and child support payments, are not typically included in bankruptcy and will still need to be repaid.

During the 12-month period of bankruptcy, a trustee will be appointed to manage your finances and sell any assets that are not protected by law to repay your creditors. Any remaining debts will be written off at the end of the 12-month period, allowing you to start afresh.

It’s important to note that bankruptcy can have long-lasting effects on your credit score and financial history. The bankruptcy will remain on your credit report for a period of six years from the date it was declared, which can make it more difficult to obtain credit or loans in the future.

5 Signs You Might Be Facing Bankruptcy

Here in the UK, debt is a national crisis affecting people from all walks of life. And when debt really gets out of control, declaring bankruptcy is often the only viable option for dealing with them. On the plus side, bankruptcy and other forms of personal insolvency, such as IVAs and DROs, don’t carry the stigma that they once did.

If bankruptcy turns out to be the best way to manage your debts, there’ll be some difficult times ahead – but you could walk away from your money problems just 12 months after your Bankruptcy Order is made. This article looks at 5 common warning signs that bankruptcy might be just around the corner.

  1. You’re relying on credit to make ends meet

In recent years, static wage and salary levels combined with rising living costs have left many people trapped in a vicious circle of never-ending debt.  And if you’re spending more than you earn each month, you’ve got problems. Whether you’re relying on credit cards, bank overdrafts, payday loans or even all three, the situation won’t go away on its own, so it’s time to seek expert help.

  • Your credit cards are always maxed out

Thanks to irresponsible lending practices that the FCA is trying to stamp out, many people have ended up with combined credit card limits that out-strip their annual incomes several times over. And if temptation proves too much, you could find yourself with a mountain of debt and no realistic way of paying it off.

A key warning sign is only ever paying the minimum payment because that’s all you can afford. You might feel that by doing this you’re keeping your head above water, but in reality, you could be heading for serious trouble.

  • You’re avoiding your creditors

If you’re leaving bills and reminders unopened, avoiding creditor phone calls and not answering the front door bell, then things have got out of hand. You need to stop sticking your head in the sand and hoping the problem will go away on its own. As soon as bankruptcy, or any other form of personal insolvency, is put in place, your creditors will be legally obliged to leave you alone. So, the sooner you take action to tackle your debts, the sooner the harassment will stop. The ball’s in your court.

  • You’re worrying excessively about your debts

Everyone worries about money every now and again. But your debts shouldn’t be keeping you awake at night, giving you nightmares or distracting you from work or other activities. It’s a sad fact that being in debt is often linked with the development or worsening of mental health problems such as anxiety and depression, which can have serious long-term consequences for your health.

So if you’re feeling overwhelmed by your debts, or your money problems are dominating your life, it’s crucial to seek professional debt advice straightaway. Trained debt advisers are fully aware of the health problems that debts can cause. They’ll discuss your situation with you in confidence and can refer you to appropriate support services if required.

  • You receive a repossession notice

You probably know that your home can be repossessed if you don’t keep up with your mortgage payments, or repayments of any other loan that’s secured on it. But did you know that your unsecured creditors, such as credit card providers and payday loan companies, can also take steps to repossess your home or other assets?

This can happen under the following circumstances:

  • Your creditor takes out a County Court Judgement (CCJ) against you and then applies for a charging order to enforce it, and
  • The charging order is made final (it’s a two stage process) and you don’t comply with the terms and conditions required by the court, and
  • You’ve missed payments that the court ordered you to pay on the CCJ.

If you’ve had a charging order made against you, this means that the court has ordered the amount of your unsecured debts to be secured against the value of your home or another asset. In most cases, your creditors will happily wait for you to sell the asset in question before collecting what’s owed to them. But under the circumstances described above, they can try to make you sell the asset immediately.

Receiving a charging order is itself a sign that your debts are severe, but a repossession order takes things to a wholly different level. It’s imperative to consult a qualified debt counsellor or licensed insolvency practitioner for advice as soon as possible.

How To Clear Your Debts Yourself

If you can no longer afford to meet your credit commitments, you need to act fast to get things under control. There’s no use burying your head in the sand, as the problem won’t go away on its own. However, the good news is that are plenty of options available to help you clear your debts.

What’s the best debt solution for me?
The right solution for you will depend on your individual circumstances. For example, the size and type of your debts, whether you own your home and how much (if anything) you can afford to repay your creditors.
There’s a huge amount of information out there about the different debt management solutions and how they work, and it’s easy to feel confused or overwhelmed. That’s where speaking to a qualified debt adviser can help.

Three of the most common debt solutions that might be available to you are:
 Debt management. This might be a suitable choice if you owe unsecured debts such as credit cards and payday loans that total more than £3,000 and you’re able to pay your creditors at least £100 a month. It might take you a while to pay off your debts, but we may be able to get your creditors to freeze interest and charges on your accounts, relieving some of the pressure. Debt management is also an informal solution that offers more flexibility than some other options.
 Individual Voluntary Arrangement (IVA). You could consider an IVA if you owe more than £8,000 in unsecured debts to multiple creditors and can afford to pay your creditors at least £100 a month. Unlike debt management, an IVA is legally binding and you must stick with it for five or six years. On the plus side, you’re unlikely to lose your home if you own your property and you’ll have legal protection from your creditors. Best of all, any leftover debts within the IVA will be cancelled when it ends – helping you clear your debts once and for all. Read more.
 Bankruptcy. Forget the old-fashioned stigma around bankruptcy. Times have
changed and it’s now potentially a viable option for anyone with serious debts and little or no assets or income with which to repay them. Yes, there are still restrictions and implications that you’ll need to consider very carefully before going ahead. But if, like many bankrupts, you end up being discharged after 12 months, you could be leaving most or all of your debts behind in just a year’s time. And of course, our team will be on hand to support you every step of the way, from helping with the paperwork to offering advice on your court appearance.

Of course, there are many other ways of dealing with debt. These include:
 An Administration Order
 A Debt Relief Order (DRO)
 Consolidating your debts
 Full and final settlements
 Token payments (a temporary measure).

How do I get started?
Simply get in touch with NationalDebtLine. who will be able to provide you with further guidance. Once you’ve decided how to clear your debts, their expert advisers will implement your chosen solution and offer ongoing help and support.

IVA And Your Credit Rating

If you’re already having debt problems, the chances are your credit rating has already been adversely affected. However, your choice of debt solution could make a difference to your future credit applications, so it’s important to bear this in mind if, for example, you want to apply for a mortgage at some point.

If you’re already having debt problems, the chances are your credit rating has already been adversely affected. However, your choice of debt solution could make a difference to your future credit applications, so it’s important to bear this in mind if, for example, you want to apply for a mortgage at some point.

What information appears on your credit file?

If you choose an informal Debt Management plan vs an IVA, it’s possible that this won’t appear on your credit file at all. However, your creditors might ask for a note to be added about your plan. In a way, this could work in your favour as it shows that you’re taking positive action and are committed to paying off your debts.

On the other hand, if the plan isn’t marked on your credit file, you could continue to accrue adverse payment information on the debts you’re paying off. This is because you’ll be paying a lower amount each month than shown in the original credit agreement, which could be recorded as missed payments on your credit file. If this happens and the debts end up defaulting, this information will stay on your file for six years from the date of default.

For an IVA, Bankruptcy and other forms of personal insolvency, the start date will always be marked on your credit file. When your insolvency period comes to an end, another record will be added. These records will both be removed six years after the start date, unless there are unusual circumstances such as a Bankruptcy Restrictions Order.

What happens during the six year period?

During the six years that adverse information appears on your credit file, you’ll find it harder and more expensive to obtain credit. If you’ve been made insolvent, you may also be subject to restrictions around applying for credit during the initial period when your bankruptcy, IVA or DRO is in place.

In any case, it’s a good idea to get your existing debts completely cleared before you even think about applying for more credit. If you’re in an IVA plan, this means waiting until the arrangement or plan has completely finished – which could take six years or more anyway.

What happens after the six year period?

Once the adverse information has dropped off your credit file, you may find it easier and less expensive to obtain credit. However, some lenders will require you to disclose whether you’ve ever been declared bankrupt or insolvent, so you’ll need to be honest about this.

And if you apply to lenders to whom you’ve previously been in debt, you may find they won’t lend to you, as they could still have details of your debts on file.

Regarding mortgage applications, it’s important to note that all forms of personal insolvency could affect your chances of obtaining a mortgage – not just bankruptcy. Your best bet is to speak to a mortgage broker who specialises in helping people with poor credit histories, as they’ll be able to recommend suitable lenders to approach.

When can I start to repair my credit rating?

You can start repairing your credit rating as soon as any restrictions around applying for credit have been lifted. In the case of bankruptcy or a DRO, this could be just 12 months after the order is made against you. However, as already noted, it will be another five years before this information is removed from your credit file, so you may find there’s nothing you can do for the time being.

On the other hand, if you can find a provider that’s willing to lend to you (and your old debts have been wiped out by the DRO or Bankruptcy Order) – go ahead. The sooner you can start building up positive credit information, the better. Start small with a credit card that’s designed for people with poor credit histories. Use it sensibly for small transactions and pay off the balance in full every month. In time, you could try applying for a mobile phone contract or pay-monthly car insurance policy. But be very careful not to over-stretch yourself!

Adding New Debts To An IVA

When you decide to enter into an IVA, you’ll be asked to disclose all your unsecured debts so they can be included into your IVA. These include debts run up on credit and store cards, payday and personal loans, bank overdrafts and catalogue accounts. You’ll also need to list arrears from everyday living expenses such as overdue rent, Council Tax and utility bills, as well as any overpaid benefits or tax credits.

However, despite your best efforts, you might end up accidentally missing some of your debts off the list. This might be because you’ve simply forgotten about them, or because you’ve not heard from the lender for such a long time that you assume the debt has been written off.

Whatever the reason, these ‘forgotten’ debts will need to be addressed, so it’s important to tell the licensed Insolvency Practitioner (IP) who manages your IVA about them as soon as they come to light. What happens next will depend on several factors.

The size of the debt

If the new debt is worth less than 15% of the total amount of debt already included in the IVA, your IP should be able to add it into the IVA without consulting your creditors. If the debt amount is over 15%, your IP will need to get permission from your creditors before adding it in.

They’ll do this by calling a variation meeting and asking your creditors to vote whether or not to accept the new debt. Other factors may also be discussed, such as a change in your monthly payment amount or an extension of the IVA term. Just like at the original creditors’ meeting, the variation(s) will only be approved if at least 75% of your creditors vote in their favour.

Whilst some renegotiation may be required, evidence suggests that most creditors are happy to accept new debts into an existing IVA – even if this means they receive less money in the long run. The obvious reason for this is that rejecting the new debt could cause the IVA to fail and they could end up receiving nothing.

NB. Once a new debt has been accepted into an existing IVA, the ‘forgotten’ creditor is bound by its terms in the same way as your other creditors and can’t take any other action against you to recover the debt. If the new creditor isn’t happy with the IVA’s terms, they have 28 days from the date they were told about it to challenge the IVA if they wish.

The type of debt

Benefit and tax credit overpayments are two of the commonest ‘new’ debt types that people ask to introduce into an existing IVA. This is because you may not have known that you were being overpaid when the IVA was set up. Provided that the overpayment wasn’t a result of fraud, the amount will be dealt with following the process set out above.

If fraud was involved, then this will be investigated by the relevant organisation, such as HMRC. This could result in civil or criminal proceedings being taken against you, which could see fines being added to the amount you already owe. You can’t add the overpaid amount or any resulting fines to your IVA.

Whether the debt is accepted into the IVA

In some cases, your existing creditors won’t accept the new debt into the IVA and you’ll have to find a different way of dealing with it. For example, you or a debt adviser could try to negotiate a repayment plan with the ‘forgotten’ creditor that you can afford on top of your IVA payments. If this isn’t possible, your IVA will probably fail.

If your IVA fails, your options are somewhat limited. They include:

  • Bankruptcy or a Debt Relief Order (DRO) if you don’t own your home. A DRO has very strict eligibility criteria, such as having a maximum debt of £20,000, but the fees are much lower than for bankruptcy.
  • If you own a home or other expensive assets, you could consider selling these and using the proceeds to pay off your debts. If the amount isn’t enough to clear your balances in full, you or a debt adviser could try and negotiate full and final settlements with your creditors. This involves persuading them to accept a single, one-off lump sum against the debt amount and cancelling the remaining balance.
  • Borrowing money from family or friends to enable you to clear your debts or offer your creditors a full and final settlement. If you choose this option, you’re advised to approach the loan formally and put a written agreement in place stating the repayment terms and what will happen if you can’t repay the debt.

Brand new debts incurred after your IVA has started

Moving on to a slightly different topic, it sometimes occurs that a person with an IVA in place manages to obtain additional credit during the IVA’s term. If this happens and you then default on the loan, you’ll have broken the terms of your IVA and it will probably fail. Your options will then be the same as set out above.

Debts that arise after an IVA has finished

It’s rare that a ‘forgotten’ debt will resurface after an IVA has run its course. However, if this happens, the creditor is legally entitled to receive the same amount as they would have been paid through the IVA. You’ll need to contact your IP to find out how much you owe them and discuss how to make payment.

What’s Best -Debt Management Or An IVA ?

Debt management or an IVA?

We’re often asked about the differences between Debt Management and Individual Voluntary Arrangements (IVAs). It’s certainly true that there are some common elements, which is where confusion can arise. However, there are also a number of key differences which we will explain to help you consider which solution might suit you best.

Your debt amount and repayments

You’ll need to owe at least £3,000 in unsecured debts such as credit cards and loans to qualify for Debt Management. For an IVA, the amount owed will normally be at least £8,000, owed to at least two unsecured creditors.

With both solutions, you’ll need to be able to repay at least £100 a month. The amount you can afford to repay will be calculated by your debt adviser. They’ll also work out the proportion of each monthly payment that should go to each creditor. The resulting information will be used to create repayment proposals for your creditors.

Note that neither Debt Management nor an IVA can be used to pay off secured debts, such as mortgage arrears. You’ll need to pay these separately, or consider a solution which includes this type of debt, such as bankruptcy.

Informal vs. formal

Many people are attracted to Debt Management because it’s an informal option. It can be set up and managed without an Insolvency Practitioner (IP) or the courts. No one needs to know about your plan, so you can keep it private. You can cancel it at any time, or change the amount of your monthly payments if your finances change. However, the informal nature of Debt Management also means your creditors can still take you to court at any time.

On the other hand, an IVA is a formal solution that can only be set up and managed by an IP. Both you and your creditors are legally bound by its terms and they can’t take you to court once the IVA is in place. You’ll need to make all your payments on time and comply with the IVA’s terms, or your creditors could try to force you into bankruptcy. As with Debt Management, it may be possible to increase or decrease your monthly payments if your finances change.


You’ll need to pay set-up and management fees for both solutions. However, these will be included within your monthly payments. The fees involved are based on each persons individual circumstances.

Creditor acceptance and contact

As you’d expect from an informal solution, your creditors aren’t obliged to accept a proposed Debt Management plan. And whilst they may agree to freeze interest and charges, they’re not obliged to do so. However, our debt advisers will do our best to negotiate favourable terms. Even if not all your creditors accept our proposals, the plan may still go ahead. And once it’s in place, we’ll distribute your monthly payments and deal with your creditors on your behalf, making life a little easier for you.

For an IVA to go ahead, at least 75% of your creditors (by debt value) must agree to your IP’s proposals. If the IVA is approved, any creditors who voted against it will still be bound by its terms, and interest and charges on your accounts must be frozen. As with a Debt Management plan, your IP will take over all contact with your creditors and distribute your monthly payments on your behalf.

Time period

There’s no set time period for Debt Management – it depends on how much you owe and the new payment amounts that we’ll negotiate for you. Once the plan is in place, it will continue until your debts have been cleared in full. It’s important to note that you could end up making payments for longer, and repaying more in total, with Debt Management than under your original credit agreements.

An IVA runs for a set time period, usually 60 months. After this time, provided you’ve paid on time every month and complied with its terms, the IVA will end and any remaining unsecured debts within it will be written off. (This is why an IVA can be a better option for people with large debts that could take a long time to clear with Debt Management). However, if you miss any payments, your IVA may be extended or could fail.

Your home

You can apply for Debt Management or an IVA whether or not you own your home. An IVA is different from bankruptcy in that you can usually stay in your home. However, you’ll normally be asked to release equity or re-mortgage the property for the benefit of your creditors. If this isn’t possible, the IVA may be extended for another 12 months.

Choosing Debt Management can be more risky for homeowners as your creditors could try to repossess your home through the courts at any time. However, this is less likely if all your unsecured creditors accept the plan and you stick to your monthly payments.

Please note that, whatever happens with your Debt Management plan or IVA, you’ll still be at risk of having your home repossessed if you don’t keep up with your mortgage or other loan repayments that are secured on it.

Your credit rating

Both solutions are likely to affect your credit rating, although this may well be poor anyway. An IVA will remain on your credit file for up to six years from the start date, which could make it harder to get credit in the future. You’ll also be restricted from obtaining more unsecured credit during the IVA, as part of its terms.

With Debt Management, your plan won’t be mentioned on your credit file, but your loans and agreements may be shown as being in default, which could affect your ability to get credit for a while.

Plan or arrangement failure

If you don’t make all your monthly payments on time, or comply with all the terms of your IVA, your Debt Management plan or IVA could fail. If this happens, your creditors will be free to pursue you through the courts for repayment, which could include trying to repossess your home or force your bankruptcy.

This is why it’s so important tell your IVA company about any issues that prevent you from, or make it hard, to meet your monthly payment commitments. You may be able to reduce your Debt Management or IVA payments, if your creditors agree to this, so please talk to them as soon as any problems arise.

IVAs For The Self Employed

Until Individual Voluntary Arrangements (IVAs) came along, the main alternative for business owners with serious debt problems was bankruptcy. Unfortunately, whilst this would solve the immediate issue of dealing with overwhelming debt, it also meant that the business usually had to be closed, staff laid off and any assets such as buildings sold.

IVAs have changed all that, making life a little easier for self-employed people who find themselves struggling with debt. We take a look at how IVAs work for business owners and answers some of the questions we’re often asked by our self-employed clients.

A solution for both personal and business debts

The beauty of an IVA is that you can include both your personal and business debts within it. This includes any overdue taxes (including VAT) and National Insurance that you owe HMRC. This comes as a relief to many business owners, as HMRC doesn’t take any prisoners when pursuing debts.

You can also include loans and credit cards taken out in your company name and any unsecured debts that you owe personally. It’s important to note, however, that an IVA can’t be used for secured debts such as mortgages or Hire Purchase agreements. So if you have debts secured on property, or equipment such as printing presses, you’ll need to keep up with your payments to avoid repossession.

You can carry on trading as normal

Your day to day business operations will be largely, or completely, unaffected by your IVA. If you owe money to your personal and/or business bank through a loan or overdraft and this is included in the IVA, you’ll need to close the accounts in question and open new ones. But otherwise, you should be able to carry on as normal: keeping your finance agreements in place, and retaining your business assets and staff.

Your clients don’t need to know

An IVA is a more private solution than bankruptcy. Details will appear on the public Insolvency Service register but not in the newspapers, so it’s unlikely that your clients will find out about your debts unless you tell them yourself. This element of privacy is a big advantage of a self employed IVA, as it could help you retain business that you might otherwise have lost.

You’ll need to keep a close eye on cashflow

When you enter into an IVA, you’re committing to pay a set amount off your debts each month, usually for five years. This means you’ll need to keep a very close eye on your business cashflow to make sure you can keep making these monthly payments. You’ll also need to show the licensed Insolvency Practitioner (IP) dealing with your IVA that you can afford the payments in the first place, by presenting your accounts and cashflow projections.

If you do experience a dip in cashflow during your IVA, it’s not the end of the world. Your IP may be able to vary the amount of your monthly payments for a while, if your creditors agree to this. It’s important to note, however, that the IVA will fail if you don’t meet the payment obligations agreed with your creditors – and this could lead to your bankruptcy.

You’ll be subject to certain restrictions

An IVA doesn’t change your working life in the way bankruptcy would, but there are still some important factors to bear in mind. There’ll be restrictions on your expenditure and you probably won’t be able to get any more credit (secured or unsecured) whilst the IVA is in place. Your credit rating will also be affected for up to six years from its start date.

Also, if you own business or personal property, you may be required to re-mortgage or release equity from it during the IVA, usually in year four, for the benefit of your creditors. If you’re unable to do this, the IVA may be extended.

Debt Management may also be an option

If an IVA isn’t a suitable option, you may be able to consider Debt Management instead. You’ll need to have unsecured debts of more than £3,000 and be able to repay your creditors at least £100 a month. Debt Management is an informal solution, so it doesn’t give you the legal protection offered by an IVA, but it could help you avoid bankruptcy if your debts aren’t too serious.

Do I Need To Remortgage During An IVA

If you are a homeowner and have equity in your property then you’ll usually need to remortgage or release equity from your home during the fourth year of your IVA. An Individual Voluntary Arrangement (IVA) can be an option for managing your debts if you owe over £6,000 in unsecured debts and can afford to make monthly repayments of at least £80. If you’re a homeowner, an IVA offers you an advantage over bankruptcy and Debt Management, as your home will be protected from legal action by your creditors.

Once your IVA is in place, your creditors can’t ask the court to make a charging order that would secure previously unsecured debts against your house or flat. They also can’t petition for your bankruptcy, which could lead to your home being sold for the benefit of your creditors.

However, it’s important to recognise that your home could still be at risk with an IVA, for example, if you don’t keep up with your monthly payments. And you’ll almost certainly be required to either re-mortgage or release equity from your property to help repay your debts.

Here we will answer some of the most common questions we’re asked about re-mortgaging or releasing equity during an IVA.

1. When will I need to re-mortgage my home?

You’ll usually need to re-mortgage or release equity from your home during the fourth year of your IVA. Most IVAs run for five years, so you’ll be coming towards the end of the arrangement. The reason for this timing is to give you some breathing space to get back on your feet, so you won’t be hit too hard by the additional costs of re-mortgaging or releasing equity.

2. Will I be told about this in advance?

Yes. The licensed Insolvency Practitioner (IP) who sets up your IVA will discuss the possibility of re-mortgaging or releasing equity before the arrangement is set up. If they decide that this will be required, it will form part of the proposal that will be sent to your creditors for consideration. If the IVA is approved, the requirement to re-mortgage or release equity will then be written into its legally-binding terms.

3. How much equity will I need to release?

Your creditors will expect you to raise as much money as possible to help repay your debts. However, the amount you’re able to borrow will depend on your individual circumstances, such as your credit history and the amount you can afford to repay your lender each month. The percentage of equity you can release from your property may also be capped to, say, 75% or 80%, by individual lending policies.

4. Will I get the same interest rate as my current mortgage?

Not necessarily. The interest rates available to you will depend on market conditions and may also be affected by your credit rating and/or payment history with your current lender. This could mean that you end up paying more for the amount you’re currently borrowing on top of the additional amount for the re-mortgage or equity release loan. There may also be upfront fees to pay, even if you stay with the same provider.

5. What if I can’t re-mortgage or release equity?

It isn’t always possible to re-mortgage, even if this is part of your IVA terms. For example, your credit history or general market conditions might stop providers lending to you. Or, your financial circumstances may have stayed the same or got worse during your IVA, in which case you would be unable to afford the added burden of increased mortgage payments.

Your IVA terms will set out in advance what will happen if you’re unable to re-mortgage as planned. In most cases, your IVA will simply be extended by 12 months. Your normal payments will continue for an extra year, so your creditors will still receive some of the money they were expecting from a re-mortgage or equity release.

6. If I can’t re-mortgage, will my debts still be written off at the end of the IVA?

Yes, provided that you make all your monthly repayments on time and stick to the IVA’s other terms. Even if extending your IVA by a year doesn’t pay your creditors as much as if you’d been able to re-mortgage or release equity, this won’t stand against you. After the IVA has ended, any leftover unsecured debts listed within it will still be cancelled.

7. Can I re-mortgage earlier than Year 4 of my IVA?

If your situation makes this possible and your IP agrees, yes. Circumstances like getting a better-paid job or co-habiting with a partner can increase your disposable income, enabling you to raise money against your property when this wasn’t possible before. On occasion, this has even enabled people to settle their debts in full and end their IVA early.