F.A.Q.'s and expert advice

I have a car on HP. How would an IVA affect this and would I be able to keep it if I started an IVA?

Provided the car has a reasonable value there is rarely a problem with keeping the car in the IVA. Hire purchase is a form of secured lending and IVA's only deal with unsecured debt so the HP lender won't be affected. A provision will be made for you to make your monthly HP payment when calculating your monthly disposable and this will continue for the remaining term of the HP agreement.

We are in an IVA but aren't very happy with our IVA provider. Could we move our IVA to your company?

A change of insolvency practitioners would require an expensive application to court which it is unlikely that you could afford so the practical answer to your question is "no". If you are having difficulties in your IVA I would strongly recommend that you try to resolve your problems with your current insolvency practitioner who may have suggestions as to how the IVA can be got back on track. If you are not able to work with the insolvency practitioner's staff don't be afraid to ask to speak to the insolvency practitioner directly.

My IVA was approved several weeks ago and I am still receiving threatening letters and calls. Why is this?

Unfortunately, lenders can be very slow to update their systems and the letters and calls that you are receiving will be because the collection departments still have not been notified of your IVA. Rest assured, now that your IVA is in place no further recovery action can be taken against you but we understand that it is still distressing to receive this type of communication. A quick call by you to the relevant department may sort this out because your lender is quite capable of confirming that an IVA is in place but sometimes you may find yourself talking to someone who does not think that an IVA has been approved. If this happens get the appropriate contact details and let us have them and we will ensure that any further communication with you is stopped.

Will I have to sell my house if I go into an IVA?

The answer to the question is "No" unless that is what you want to propose to creditors for a particular reason. The principles that apply to the vast majority of IVA's that are proposed state clearly that you will never be obliged to sell your property during an IVA although you will be expected to try to remortgage or refinance in the final year of the Arrangement with a view to releasing equity that will be paid in to the IVA. If you are unable to remortgage (which at present will almost certainly be the case) the term of the IVA would be extended by a year to enable you to make 12 more monthly payments rather than having to remortgage.

I'm self employed and owe HMRC a lot in tax. Would an IVA be right for me?

The purpose of an IVA is to get a legal agreement across a group of creditors. If you only owe tax to HMRC there would be no point in proposing an IVA, you might just as well put your proposal to HMRC directly. If you have other debts, however, an IVA could be a very effective way of getting your debts under control. You will need to be able to demonstrate that your business is capable of making a profit going forward and if you need to get the agreement of HMRC you will have to be up to date with the submission of your tax returns.

What documentation will I need for my annual review?

As a general rule, we will only need a copy of your latest P60 and your most recent pay slip. If you have had significant increases in expenditure, documents to support this would be helpful. We are unlikely to ask for copies of your recent bank statements unless this is the only way in which we can confirm your current circumstances. If you are self employed, we will need to see a copy of your latest accounts and/or your most recent tax return

I'm paid 4 weekly. Why are my monthly earnings stated differently in the IVA and how do you calculate this amount?

If you are paid 4 weekly then you are paid slightly more than 12 times a year, as opposed to someone who is paid on a calendar month basis who is paid exactly 12 times a year. To ensure that the same level of earnings is taken for someone who is paid 4 weekly as compared to someone who is paid on a calendar month basis, take the net 4 weekly pay and divide this by 4 to get a weekly amount. Multiply the weekly amount by 52 to get an annual amount and divide this by 12 to get the monthly equivalent. This is the amount that we will use for your IVA monthly income.

Once I complete my IVA how can I improve my credit rating?

There should be no adverse entries on your credit file dated later than the commencement of the IVA and, in common with all adverse entries, they will stay on the file for 6 years. Most IVA's run for 5 years and so you will have a year to wait for the adverse entries to be removed, following completion of your IVA. In the meantime you should check your credit files with the 3 main credit agencies and ensure that there are no adverse entries that are dated after the commencement of the IVA. If there are, contact the lender concerned and request that the entry is dated back to the date of the IVA. If there is any delay in doing this contact the data controller at the lender to make a complaint. You may also be able to apply for a mobile phone contract (or you may have one already) so ensure that payments are made on time to the phone provider. This should quickly establish a credit record. You may also be able to obtain a credit card with certain providers who accept customers with blemished credit records. Provided that you maintain timely payments to the account this will also improve your credit rating. We do hear of surprising instances where clients are able to obtain competitive loans very soon after the completion of their IVA and so each lender is likely to have a different policy and shopping around for a loan may well be worth the effort.

In my IVA, when are creditors paid?

Our proposal states that creditors are paid a dividend on a quarterly basis but only after the agreed Nominee Fee and the set up expenses of the IVA have been paid. In IVA's this is standard practice and is as agreed with creditors. Of course, a dividend can only be paid where there are funds available to make a distribution to creditors. If your creditors include any debts owed to HMRC for self assessed tax or VAT the terms and conditions of the IVA prevent any dividends being paid to other creditors until HMRC has submitted their final claim.

Could I be made bankrupt if I go in to an IVA?

The answer to that is almost certainly no! The only real exception is if you had a large debt (probably over £20,000) for tax owed to HMRC. Under those circumstances if HMRC vote in favour of your IVA proposal it is almost certain that they will insist on a new clause being inserted to the contract which states that money must be put to one side to make you bankrupt in the event that you default in the IVA. if that happened then you would not have to accept HMRC's condition but that would mean that their vote in favour of the proposal would be converted to a vote against and the IVA proposal may not be approved. None of the usual high street lenders have a policy of seeking bankruptcy in the event of default.
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Johnson Geddes is a member firm of and regulated by the Insolvency Practitioners Association

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