IVA FAQs | Debt Management Advice from MoneySolve

Questions on Debt

Questions on Debt Management

Questions on Debt Consolidation

Questions on IVAs

Questions on Insolvency

Do I have to go bankrupt when insolvent?

Questions on Bankruptcy

Questions on CCJs

Can Automatic Number Plate Recognition be used to enforce CCJs?

Answers to questions on debt

What is the difference between secured and unsecured debts?
When you borrow money the loan can be secured against an asset that you own such as your home. Thus if you fail to keep up with your repayments the secured creditor can take steps to recover the asset on which the loan is secured. Any finance which is not secured against an asset in your ownership is referred to as unsecured.
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What are priority debts?
Some debts are more important than others. Defaulting on priority debts could result in serious consequences like repossession of your home, disconnection of utilities, deductions from wages or fines. A list of priority debts and the possible consequences of non-payment is given below:

Mortgage arrears (Repossession of your home)
Secured loan (Repossession of your home if loan is secured against it)
Rent arrears (Eviction)
Council tax (Deduction from wages or benefits, imprisonment)
Gas, electricity (Supply disconnected)
Maintenance payments (Deduction from wages/benefits, imprisonment)
Hire purchase (Repossession of goods)
Income tax, National insurance (Distraint, bankruptcy)
TV licence (Fine, distraint, imprisonment)

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Answers to questions on debt management

Why have a Debt Management plan?
A properly structured Debt Management plan will allow you to regain control of your debt repayments. Such a plan should satisfy your creditors that your debts are being repaid on a regular basis. This should stop intimidating letters demanding payment and should stop escalating interest charges and fees.
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What steps are involved?
You contact us. We will then ask you to supply all information necessary to set up a Debt Management programme (eg who do you owe money to, how much do you owe, what is your income and expenditure, how much do you need to live comfortably etc.). We then do the sums. We work out how much you can reasonably afford to repay each month while keeping enough of your income to maintain a comfortable lifestyle. We then contact your creditors and suggest to them that they should accept regular repayments in line with what you can afford. If your creditors accept our proposals we will set up the Debt Management programme. You pay us one regular monthly payment and we pay your creditors until your debts are paid off.
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Does Debt Management involve a loan?
No. A Debt Management programme does not require you to borrow any more money.
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How much will I pay?
The amount you pay on a Debt Management programme will depend on how much you owe because, on a Debt Management programme, you pay back all that you owe. It may be possible to freeze interest charges and fees charged by your creditors to prevent debts escalating.
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Are my interest charges frozen?
Not necessarily. In arranging a Debt Management programme for you we will ask your creditors to freeze interest charges and fees where appropriate but they are not obliged to do so.
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Is any of my debt cancelled as in an IVA?
Yes it is possible to write off the part of the debt that you cannot afford to pay. We will advise you if we think this is possible.
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Will I repay all that I owe on a DM plan?
Yes. A Debt Management programme is designed to allow you to repay all that you owe in a well managed, regular manner that will restore everyone’s confidence in your ability to repay your debts.
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Do I still deal with my creditors?
No. We do. You just pay us a single monthly payment and we pay your creditors. This continues throughout the period of your Debt Management programme. It is possible that you may still receive correspondence from your creditors. This can normally be passed on to the company supervising your Debt Management programme. You may receive statements from your creditors showing how much you still owe. These statements should confirm that your level of debt is diminishing as the regular monthly payments are made.
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Will my credit rating be affected?
Probably not. Since a Debt Management plan does not involve further borrowing there is no reason why anyone should perform a credit check on you. However you should seek further credit while on a Debt Management programme. Indeed obtaining further credit while on the programme may prove difficult and may jeopordize the program itself. Your creditors will accept an informal payment program assuming that youwill not take out further borrowing. It is likely that your credit rating will improve on completion of a Debt Management programme but this cannot be guaranteed. Credit Reference agencies retain records for a further six years after completion of a Debt Management programme. It is possible that a creditor will have registered your inability to pay with a credit reference agency such as Equifax or Experian.
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Do I need to be a home owner?
No. Your status on home ownership makes no difference. You can be a tenant, live with relatives or be a home owner.
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Will my creditors deal with you?
Normally the answer to this question is yes, especially at the present time when so many people find themselves in debt. MoneySolve has a well-established record of dealing with creditors on behalf of people in debt. The Office of Fair Trading encourages representation and requires your creditors to deal with Debt Management companies like us when they have been apontd to act for people in debt. The Office of Fair Trading express the view that when a consumer appoints a representative to negotiate on their behalf, it is an unfair and improper business practice on the part of the creditor to operate a policy, without reason, of refusing to consider such a request. It is a principle of law that creditors cannot refuse to accept payments tendered by someone on behalf of someone else.
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Answers to questions on debt consolidation

Why have a debt consolidation loan?

Unless your circumstances fit specific criteria we never recommend swapping one from of debt for another. Thus even though the interest rate on a credit card debt will usually be much higher than the interest rate on a debt consolidation loan in most circumstances you might be better off undertaking an informal payment plan or an IVA to your creditors. We will advise you on what is best for you.

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What steps are involved?
If you are looking for a Debt Consolidation loan we will recommend the services of an Independant Financial Advisor who will help you and is qualified to advise you on what products are available.
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Are my interest charges frozen?
No, but because you will pay off all your debts immediately using a Debt Consolidation loan the new loan will attract its own interest and arrangement fees.
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Is any debt cancelled as in an IVA?
In a Debt Consolidation programme no debt is cancelled. You pay back all that you owe but it might be possible depending on who you owe the money to and get them to agree to a debt reduction. We will advise you if we think this might be possible.
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Will I repay all that I owe?
Yes. A debt consolidation loan lets you pay off all your creditors immediately. You pay your creditors all that you owe them.
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Do I still deal with my creditors?
No. Because the consolidation loan will have been used to pay off your existing creditors in full you will no longer have to deal with them. You will only have to deal with the company that has arranged the consolidation loan.
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Will my credit rating be affected?
No. Your credit rating should not be adversely affected because you will have paid off all your debts except for the single consolidation loan. This is dependent on you making regular payments.
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What if I don’t keep up with my payments?
If you default on your payments you risk losing the assets against which the consolidation loan is secured. If the loan is secured against your home you could lose your home.
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Answers to questions on IVAs

What is a voluntary arrangement?
This is a legal agreement between you and your creditors under which you pay an affordable and agreed monthly sum for between 3 years and 5 years. The total amount paid by you is divided up between all of your creditors and they accept this amount in full and final settlement of all the money that is owed to them once you have made the final monthly payment into the arrangement. Your creditors will then write off any amount which has not been paid in this way. This will regularly result in creditors writing off up to 75% of what they are owed and in many cases even more than that. Voluntary arrangements must be controlled by a properly authorised and qualified licensed Insolvency Practitioner.
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How much will I have to pay each month?
We will carry out a full assessment of your income and expenditure and thereafter ensure that the monthly amount that we will ask you to pay is an amount that is affordable to you and will allow you a comfortable standard of living during the course of the voluntary arrangement. The amount that you pay will be calculated by looking at your monthly income and your monthly outgoings to ascertain what surplus cash is available to be paid to your creditors. To do this we ignore any payments that you presently make to your creditors because these will also stop once the IVA begins. The amount can then be paid into your voluntary arrangement via a standing order or payment book to suit you.
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Will I qualify for an IVA?
Any individual who is having difficulty paying their debts can apply for a voluntary arrangement. We will need some basic information from you so that we can ascertain if a voluntary arrangement will be the right solution for you and if it is we will prepare the initial papers required to put the arrangement forward to a qualified insolvency practitioner for him/her to advise you and submit your proposal to your creditors.
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Will my creditors really write off debt?
In voluntary arrangements creditors are offered more than they would receive if you were made bankrupt. Additionally the creditors know under the voluntary arrangement what they are going to receive and when they are going to receive it. They do not have to spend time and money chasing you for payment or employing debt collection agencies or issuing court proceedings and can thus save time, cost and expense. Creditors usually take a sensible and practical approach to the situation.
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What will happen to my house?
You will not be required to sell your property. If there is some equity in the property (the difference between the value of your house and the amount that you owe on it to your building society) then offering part of the equity to creditors will provide a higher dividend to them and so make them more likely to agree to the proposal. Sometimes it is possible to use the equity in your property to offer creditors a lump sum payment in full and final settlement of the amounts they are owed your insolvency practitioner will advise on this.
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Will I be able to keep my car?
You will always be able to retain your vehicle because more often than not you will need a vehicle to get to and from work to allow you to earn the money that you need to live. Creditors recognise that if you cannot get to work then you will have no surplus income to make payments into the voluntary arrangement and are therefore happy for you to keep your car.
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Is an IVA a loan?
No. Essentially an IVA is a legal arrangment whereby, with your creditors’ consent, you pay and they agree to accept a lesser sum than is owing to them.
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Can I have an IVA if I have a CCJ?
Yes. Indeed it will help as it will prevent your creditors from pursuing enforcement proceedings against you.
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Do I need to be working full time?
Not necessarily. However you will need to demonstrate to your creditors that you have sufficient surplus income to pay into the arrangement.
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Does my partner need to know about my IVA?
Yes if you are married or co-habiting. It is likely that creditors will require full information on household income and expenditure.
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Will all my debts be covered by my IVA?
An IVA only covers unsecured debts including unsecured loans, store cards, credit cards, catalogue debts and arrears regarding utilities.
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Do all my creditors need to agree to my IVA?
No. Only 75% of your creditors need to vote in favor of accepting your proposal for it to be accepted. Even if 25% (or less) of your voting creditors vote to reject the proposal they will still be bound by the outcome of the arrangement and will not be able to pursue you outside of the arrangement even though they voted to reject the proposal.
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Will my credit rating be affected by my IVA?
If you are already in arrears with your repayments to your creditors then you will already have a poor credit rating. If you successfully complete an IVA it will go some way towards restoring your credit rating but this may not be immediate.
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How long does an IVA last?
Between 3 and 5 years depending on your circumstances.
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Answers to questions on insolvency

Do I have to go bankrupt when insolvent?
No. Although many individuals and businesses declare bankruptcy when insolvent there are alternatives.
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Answers to questions on bankruptcy

What is bankruptcy?
Bankruptcy is essentially a declaration to your creditors that you cannot afford to repay your debt. Once a bankruptcy order has been made your creditors will not be able to contact you directly again. Recent changes to regulations in bankruptcy, effective from 1st April 2004, allow for automatic discharge from bankruptcy within 12 months. You will be required to make payment towards bankruptcy debts for a total of 3 years after the bankruptcy order has been made.
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How can I bring about my own bankruptcy?
We can assist you in applying for your own bankruptcy. The procedure involves you completing a set of forms, making an appointment at your local county court where your bankruptcy application can be presented to the court. Once consideration has been given to your application by the court clerk, an Order is made and the Official Receiver is appointed in the first instance to manage your financial affairs and to take over negotiation with your creditors. The Official Receiver may appoint a Trustee in Bankruptcy to take over the management of the bankruptcy. This usually happens when there are assets, which can be recovered for the benefit of your creditors.
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What are the consequences of bankruptcy?
The disadvantages of bankruptcy are that any assets you have at the time of your bankruptcy will vest in the Official Receiver. If you own your own house and there is equity in it the Official Receiver, through the appointment of a Trustee in Bankruptcy, will take steps to take possession of your house and sell it so that any equity can be released to the creditors and help to pay the costs of administering your bankruptcy. Any policies you have will vest in your Official Receiver. This will include any ISA’s, unit trusts endowment policies. Whilst a Trustee cannot take any sums out of a pension policy for the benefit of your creditors it is important to note that if you have a works pension policy and you file for bankruptcy your entitlement to a payment out of the policy on retirement may be affected. Whether or not this is the case can be ascertained from reading the small print in your pension policy. We can help you with this. People often think that by filing for bankruptcy they do not have to repay their debt. This is not the case. The Official Receiver can expect you to make income payments for 3 years. S/he will assess what surplus income you have each week/month and expect that you pay that sum for the benefit of your creditors. The circumstances surrounding how the debt was incurred will be investigated by the Official Receiver. In some circumstances the Official Receiver may apply to the court for a Bankruptcy Restriction Order. This would prevent you from being automatically discharged within the 12 month period. Non co-operation could also result in a bankruptcy restriction order. For the duration of the bankruptcy order you will not be able to obtain credit over £500 or act as a company director. There are also some jobs that you would not be able to undertake if you were made bankrupt. Some employers’ frown on bankruptcy and it may be a term of your contract that you are solvent. If this is the case then there is a chance that you will lose your job as well. If you are concerned about any of these disadvantages then please contact us for further advice. Bankruptcies are advertised in local newspapers and in the London Gazette. You will find it very difficult indeed to operate a bank account whilst you are bankrupt.
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What are the advantages of bankruptcy?
The advantages of bankruptcy are that the creditors will not be able to make contact with you or make demands for payment directly. Once the bankruptcy order has been made you can look forward to being debt free within 3 years with the potential for the bankruptcy order to be discharged within 12 months.
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Can creditors make me bankrupt?
Creditors can apply to the court for a bankruptcy order to be made against you. This is a totally separate procedure to that of you applying for your own bankruptcy. Creditors are usually likely to take this step if you have assets which the creditors can require to be sold to repay the outstanding debt or where by the issuing of the petition the creditors feel that they can improve their prospects of receiving payment in full for the outstanding amount. The procedure for this is that the creditors usually have to apply to the court for a judgment. Then the creditor will instruct enquiry agents to arrange for service of a statutory demand. This is the start of the process. You then have 19 days in which to make an application to the court for the statutory demand to be set aside. If this time lapses and no application is made then in those circumstances a bankruptcy petition can be presented at any time thereafter. If a bankruptcy petition has been presented please contact us for advise on how to defend it or what avenues are available to you.
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Answers to questions on CCJs

Can Automatic Number Plate Recognition (ANPR) cameras be used to identify CCJs?
Yes. County Court Judgments for civil debts can be enforced easily via ANPR because debtors number plates can be stored in a CCJ Debt Database. If not stopped by patrols or roadblocks your whereabouts and movements will be supplied back to bailiffs.
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