IVA’s Explained Blog 2

Welcome to day two of my week long series of IVA blogs. Yesterday’s first instalment hopefully explained all of the basics of an IVA and gave you a general overview of what it is. On today’s blog I am going to focus on your assets; what is an asset and how the IVA will impact them. I also want to go through what happens to your mortgage property in the IVA.

It is important to remember that with an IVA all of your assets must be disclosed, once your IVA is approved you are legally bond to notify us of them all, and if you fail to do so it is seen as a legal offense and can have serious consequences.

To break it down and make it easier to take in, I have broken down each asset that would need to be considered in the IVA.

House If you own the property that you live in you will not have to sell it or give it up and it isn’t at risk with an IVA as long as you keep up with the terms of the arrangement. If you have equity in your property you will be asked to release a percentage of this equity in the fourth, however I will discuss this in more details later. As your mortgage is a secured debt, it will be shown as a creditor but you will still maintain your mortgage payments in full. If you have more equity than you do debt then you are solvent so an IVA isn’t an option for you.

Car If you own the car outright, as long as the value doesn’t exceed £5,000 you should be fine keeping the car. However if your car is worth more than £5,000 your creditors may ask you to sell the car and downgrade it to something cheaper. They will then ask for that money to be paid into the IVA. If your car is on Hire Purchase, then you do not actually own the car and therefore they cannot ask you to sell it.

If you have more than one car, your creditors may ask if there is a valid reason for it, otherwise they could ask you to sell one of the cars.

Motorcycle the same rules apply for cars.

Caravan These are seen by the creditors as a luxury and it is therefore highly likely that your creditors will ask you to sell it. If the caravan is on Hire Purchase, you would have to hand the caravan back to the finance company and any money still owing to them would be included in the IVA as an unsecured creditor.

Holiday Home or Time Share your creditors would see this as a luxury and would again ask you to either sell the property or stop paying into the time share and hand it back. Any money still owing to them would either then be included in the IVA as an unsecured creditor.

Shares you would need to tell us who the shares are with, how many shares you hold and the value of them. These would be detailed in your proposals and your creditors may ask you to cash in your shares. This works on a case by case basis so no definite answer can be given.

Savings you would need to tell us how much you have and you would be required to pay a percentage of this into the IVA.

Endowments as long as your endowment policy is linked to your mortgage this will not be included in the IVA, as if the money was to be released it could only be used to pay the mortgage. However if the endowment policy isn’t linked to the mortgage then the money would have to be released and paid into the IVA.

If you are a home owner and have a mortgage there is a clause in IVA proposals that states in the 54th month you must carry out a valuation of the property to show the current value of it. Your creditors would ask that you make a payment in lieu of equity in your property, they only look at you re-mortgaging up to 85% of the value of your property and only for your share of any equity.

If your secured borrowings on your home are already over 85% of the value of your home you will not have to offer any payment in lieu of equity. If not you will be asked to release equity in your home up to 85% of its value, but if you are unable to obtain a re-mortgage and provide proof of this, your arrangement will be extended by an extra 12 months payments instead. By doing this your home is completely safe.

Don’t forget to come back tomorrow as I will be talking about your creditors.

Don’t forget you can find me on Twitter and Facebook

Written by davemac on January 11th, 2011

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IVA’s Explained Blog 5

Good afternoon and welcome to the fifth and final instalment of this weeks IVA themed blogs. On Monday in the first blog I talked about what an IVA is, how it works, how it is set up and the creditors meeting. In blog two on Tuesday I talked about assets, your home, your mortgage and re-mortgaging. On Wednesday for the third blog I talked about your debts and what type of creditors each debt is classed as. And then yesterday for the fourth blog I talked about your income, how we calculate it, what income is used, additional income and benefits.

For this last blog of the week I wanted to talk a little about what happens once your IVA has finished. In your initial IVA proposals we would put forward that you make 60 payments over 5 years. As mentioned in a previous blog, you could possibly be asked to make a further 12 payments if you have a mortgaged property and are unable to release the equity. The IVA stays on your credit reference for six years. Therefore assuming you maintain your IVA payments it will only appear on your file for one further year or at the end of your arrangement depending on your plan length. After the six years your credit reference won’t show anything at all.

At this stage you will be debt free.

I am hoping that by now you should all have a clearer knowledge of IVAs, but if not and you do have any questions then please do not hesitate to get in touch. You can visit the Debt Questions forum which has a lot of other information and the opportunity to post your own questions or post questions on the Facebook discussion board or on one of the blogs or simply call our Helpline 0800 2802816 where someone will be on the end of the phone to hopefully help you.

Don’t forget you can find me on Twitter and Facebook

Written by davemac on January 14th, 2011

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IVA’s Explained Blog 4

Good afternoon and welcome to the fourth blog in this week series. So far I have spoken about a whole host of topics relating to IVAs and today I am going to concentrate on your income.

With an IVA it isn’t as simple as you telling us what you earn, what you spend and what you have left over. As an IVA is a legally binding agreement between you and your creditors everything has to be monitored and therefore proof is required as mentioned in the first blog. In the first blog I explained how we work out your surplus but today I want to go into a little bit more detail with your income and what happens if you earn anything additional as well as going through other types of income such as pensions, benefits and jobseekers allowance.

Although we only use your basic salary for the purpose of calculating your IVA payment any additional income such as overtime, commission or bonuses must be taken into account whilst in the IVA. Whilst we do not take that income into account for the purpose of your IVA proposals you will be required to notify us of any additional income and you would be required to pay a percentage of this into the IVA. You will be required, once in your IVA, to send in your Payslips regularly and your P60 annually so it would always be in your best interest to notify us straight away.

Some of you may no longer be working and will be receiving your pension, whether this is the state pension, pension credits or a personal pension all of these would be used as your income source for the IVA and all of it would need to be included.

If you are working and are paying into a pension scheme you would need to notify us of how much you contribute and we would need to show that you are making the minimum contributions whilst you are in the IVA.

Another popular source of income for many of our clients is from benefits. These benefits include:

*Disability Living Allowance

*Income Support

*Child Benefit

*Child Tax Credits

*Incapacity Benefit

*Working Tax Credits

The majority of benefits can be used to contribute to your IVA income. All of the ones above listed do. However some benefits will not usually be used mainly due to the basis that they are not guaranteed incomes. The main one of these is Jobseekers Allowance; this benefit isn’t guarantee and can only be claimed for a certain length of time. When IVA proposals are drawn up, we have to ensure the plan can be sustained for the whole 60 months and it therefore wouldn’t be in your best interest to use an income that could change or stop at any time.

Don’t forget you can find me on Twitter and Facebook

Written by davemac on January 14th, 2011

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IVA’s Explained Blog 3

Hello and welcome to day three of this week’s IVA themed blogs. Today I am going to be talking about creditors; the different types, how they deal with IVA’s and what they do to approve your IVA.

An IVA will only include all of your unsecured creditors. Your other creditors will have to be dealt with separately; each creditor is different so hopefully I will explain all you need to know below.

Unsecured – these are debts where a credit agreement has been signed where you have an agreement to make repayments towards what was borrowed until it is paid in full. They will all be included and bound by the IVA agreement.

Secured – these are debts that have a charge over an asset in the event that the agreement of payment is not met. They will be listed in the IVA as creditors however you will maintain your contracted payments to them until the amount you owe is paid back in full. The agreed payment amount will be included in your expenditure to ensure you have enough funds to cover them.

Associated – these are debts where no credit agreement has been made, it is uncommon for these to be included in the IVA. Creditors will expect any associated creditors to stand aside for the duration of the IVA. Any associated creditors would show up on your IVA proposals and a clause would be added into the terms and conditions to state that they are standing aside.

Preferred – these are creditors that are to be repaid in full, mainly because non payment could have consequences. These are excluded as if they these where to be included they could either impact there lives in some way. Once again they are listed as a creditor, however a specific payment would be allowed in the budget in order to repay this debt outside of the IVA arrangement. A clause would also be added into the proposals to state why the creditor is preferred.

Contingent – these are possible future debts and are usually debts that you have guaranteed and could be asked to pay for in the future. These would again be included in your list of creditors, and if during the IVA a contingent debt becomes repayable it would be dealt with at the time.

All of your unsecured creditors are asked to vote for or against your IVA as mentioned in the earlier blog. When your creditors vote on your IVA they can sometimes put forward what are called modifications. Modifications can range from a lot of different things; the most common modification is a cap of the fees that are charged. Other common modifications are uplifts for item in your expenditure that they feel are excessive.

With the modifications that your creditors put forward, you must accept these and if you do not then your IVA would have to be rejected. However if you accept them then your IVA will be approved and all of the changes would be actioned where necessary.

Common Modifications

*Increase in IVA payments due to excessive expenditure. Creditors tend to stick to strict guidelines therefore if they think you are over the guidelines they will ask for the difference. Common areas are for fuel for your car, pensions and life insurance.
*Cap on fees charged. This is nothing that you would need to worry about, as this would not affect you. Your payments and payment term would still be the same; we would just get fewer fees.
*A 12 month extension if your property doesn’t have any equity in it in the fourth year.

Don’t forget to come back tomorrow as I will be talking more about IVAs.

Don’t forget you can find me on Twitter and Facebook

Written by davemac on January 12th, 2011

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