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The number of people in this country with financial diffulties continues to rise, many individuals who cannot afford to pay their debts (often through no fault of their own) have the intention to resolve their problems but just do not know where to turn. Many people often ask about the same things. So here are some of the questions that we get asked most frequently.
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Please choose a link below to learn more about the different debt solutions available or click here to view a summary.
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1. What is an IVA? |
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An IVA is a legally binding agremeent between you and your creditors. You agree to pay an agreed monthly sum, usually for 5 years. This amount is then accepted by your creditors as the sum in settlement of the amount you owe and is split between them.
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2. How much will I need to pay monthly? |
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Your monthly payment will depend on your income and expenditure and is an amount that you can afford to pay. |
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3. What are the alternatives? |
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We have already mentioned bankruptcy and the possibility of borrowing more money in an attempt to consolidate your debts. You could also try to reschedule your debts informally, via a debt management plan. However an informal arrangement may be difficult to administer if you have a lot of demanding creditors and offers no guarantees. You may also take longer to finally clear your debt. |
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4. What are the Advantages of an IVA? |
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- No Social Stigma with an IVA
There is a social stigma associated with bankruptcy and they cannot be kept private because they are always advertised publicly. The bankruptcy announcement is usually published in your local paper along with your name, address and occupation. |
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However, an IVA is a private agreement with your creditors. This means that no one else needs to be told about it. As a result there is never any publicity in the local papers about IVAs.
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- No Professional Disqualification with an IVA
If you are made bankrupt, then you are not allowed to be involved in promoting, forming or managing a company without the permission of the court. |
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However, if you set up an IVA your professional or employment status will not be affected. Furthermore, you can carry on running your own business and acting as a director even if you have an IVA.
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- Keep Your Assets with an IVA including your Home.
If you are made bankrupt, then all of your assets will be vested in your trustee and they might have to be sold to repay your debts. However, with an IVA, the law permits you to retain any asset that you require in order to satisfy the domestic needs of you and your family. For example, a motor vehicle in order to transport you to and from your place of work. |
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Other Benefits of Individual Voluntary Arrangements |
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- Up to 75% of your debt can be written off with an IVA.
- With an IVA, your monthly repayments are based on what you can afford
- Your creditors cannot harass you whilst the IVA is in place.
- Once you have completed your IVA according to the specified terms then you are deemed to be debt free
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5. How does an IVA work? |
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We start with a thorough financial fact find into your individual situation and evaluate your income and expenditure to decide on the amount you are able to pay into your IVA each month.
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Furthermore, we identify the circumstances that caused your current financial hardships.
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If your creditors are pursuing any legal action against you, we are able to protect you from your creditors by acquiring a Court Order while your IVA is being set up.
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We then prepare a detailed IVA proposal, on your behalf, which is distributed to your creditors, offering your monthly disposable income that you will repay into the IVA. At this time, one of our Licensed Insolvency Practitioners will take on the role of 'Nominee' (i.e. nominating you for an IVA). Only Licensed Insolvency Practitioners are authorised to nominate you for an IVA.
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The authorised individual arranges a meeting of your creditors to be held so they can vote on the proposal. This is typically coordinated by telephone as all your creditors will have been given your IVA proposal prior to the meeting so they can understand why an IVA is appropriate for you, and the best option for them.
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At the creditor meeting, the votes are counted to calculate if the essential majority of those creditors who voted for approval has been obtained. At this point, it is possible that your creditors may have introduced changes to be included in your proposal.
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In most cases the IVA proposal is accepted at the first creditor meeting. In a minority of cases, however, if more negotiation is needed with your creditors the meeting can be postponed (for up to 2 weeks) to ensure support for your proposal.
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When your IVA is accepted all your creditors are bound by it, even those who voted against it.
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The Nominee provides a Report to both your creditors and the court where your proposed IVA application has been filed.
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Throughout the duration of your IVA, you must comply with the agreed monthly payments to the Insolvency Practitioner, now known as your 'Supervisor'. The supervisor oversees your arrangement until completion, making sure that you adhere to the terms, and is responsible for making dividends payments to your creditors. |
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Once your IVA is successfully completed, the Supervisor delivers the final report and dividend. A certificate of compliance, which verifies your successful completion of the IVA, is also filed.
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6. It's difficult for me to get time off work. Do I have to travel to meet you? |
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No. In most instances, the majority of our work is done over the telephone. But if your situation is more complicated or you would prefer a one-to-one meeting with a Senior Advisor, then we can easily arrange for an adviser to visit you at a time to suit you.
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7. Do I have to pay any costs? |
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We don't charge you any fees. These are all agreed with and are paid by your creditors as part of your IVA. Providing you keep to the agreement for the fixed term the debt that you cannot afford to repay will be written off by your creditors. |
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1. What is Debt Management? |
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A Debt management plan also known as an informal arrangement is an arrangement between yourself and a Debt Management company who agree to supervise and distribute your debt repayments to your creditors. Some people can restructure their repayments into a more convenient plan and you won't have to sell your home as part of the agreement. |
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1. What is Bankruptcy? |
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Bankruptcy is an option that often has to be considered when an individual cannot pay their debts as they fall due. Bankruptcy has a bad stigma and is publicly advertised if you facing the prospect of bankruptcy you should look at alternatives as soon as possible such as the Individual Voluntary Arrangement procedure (IVA). |
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2. What are the implications of bankruptcy? |
- You lose control of your assets
- You cannot obtain credit for over £250 without the permission from the lender
- You cannot act as a company director.
- You cannot take any part in the promotion, formation or management of a limited company (LTD)
without the permission of the court.
- You cannot trade in any business under any other name unless you inform all persons concerned of the bankruptcy.
- You may not practice as a Charted Accountant / Lawyer.
- You may not act as a Justice of the peace (JP).
- You may not become an member of parliament.
- You may not become a member of the local authority.
- Your credit is affected for many years after the annulment.
- You may be publicly examined in court.
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1. Is a remortgage or a secured loan the right option? |
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This is down to the individual and their circumstances. Mortgage rates are lower, however set up fees can be higher as well as having to pay for up front fees. There are no up front fees to pay on a secured loan. A secured loan may be a better option than a remortgage if you have a fixed or discounted mortgage as you will normally have to pay an early settlement charge to your lender. Your home will also be at risk if you do not keep up with your repayments.
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2. What about a consolidation loan? |
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A consolidation loan will combine all your existing debts into a single loan offering lower total repayments. However this may not be possible for people experiencing serious financial difficulties, as by taking on more financial responsibility you may worsen your situation.
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1. I've got a court hearing but I can't attend. What should I do?
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Wherever possible, make every effort to attend. If you have a joint mortgage, only one party need attend.
Your home is at risk - so making yourself available is paramount. If you absolutely cannot attend,
set out your position in writing, and confirm to the court what you would like to do.
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2. Do I need a lawyer to attend court?
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No. You can get one, but they are expensive - typically £130 to £175 per hour plus VAT.
This money is often better spent in an offer to repay the arrears. Some courts have Debt
Counsellors available at repossession hearings that can help. Ask the court usher upon arrival.
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3. The court has made an order for possession / eviction. Is there anything I can do?
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Yes. You can sell your home quickly before repossession, or find a flexible solution which pays your arrears,
prevents repossession and allows you to stay in your home. Blue Finance can help you find a solution which meets
these aims.
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4. How quickly can repossession be stopped?
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We can stop repossession right up to the date of eviction, depending upon your circumstances.
We strongly recommend that you contact us as soon as possible so that we can examine your situation
and try to put together a solution to save your home.
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5. If I hand back the keys, is that the end of the matter?
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No. The lender will sell the house. If there is a shortfall, the lender can recover this from
you for up to 12 years (5 years in Scotland). Also, you will be responsible for ongoing mortgage
interest payments until the sale and the cost of the sale itself. This will include locksmith costs,
solicitor's fees, surveyor's fees, estate agency fees and utility bills.
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6. Will my credit rating be affected?
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Yes. A County Court Judgment will be registered against you, which will remain on the
Register of County Court Judgments for 6 years. The lender will also register the repossession
on the Council of Mortgage Lenders register which will make obtaining a future mortgage very difficult.
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7. Do Blue Finance make any charges for their service?
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None, ever, guaranteed. If we are able to put forward a solution to save your home,
we'll cover all the costs, including survey and legal fees.
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