Welcome to Debt Advice Trust Blog

Can I take out an IVA if I am self-employed?
Yes, you most certainly can but you must remember that all business debts will be your personal debts. Being self employed is one of the most self-gratifying experiences a person can have but it does come loaded with a heavy responsibility for keeping business flowing. When things start to become lapse, the downward spiral of debt starts plummeting out of control and a reduced income means less money for creditors. This is when an IVA can give you valuable breathing space by negotiating an agreeable monthly sum with your creditors. You can then make one affordable payment whilst trying to re-build the business. A self-employed individual must be in debt to at least £15,000 and owe money to more than four creditors. He/she must also be able to show that monthly payments are affordable on a regular monthly basis for at least five years.

Is there such a thing as a lump sum IVA?
Yes, there most certainly is. A lump sum IVA does not last for five years as it begins and ends with one solitary payment known as a ‘lump sum’. All of the usual benefits of the IVA still apply but an Insolvency Practitioner is not needed as there is no need to oversee any monthly payments so there is a reduction in the fees. This means that creditors will actually receive back a larger sum and the debtor will still have the advantage of having a percentage of his overall debt reduced. In some instances debtors may only pay back a third of the total debt but this strictly depends on an individuals circumstances. Speak to a professional for free debt advice and some more IVA FAQs

Many people are becoming aware of an important clause tied up in an IVA agreement known as the 24 month no variation clause.

This important stipulation means that IVA contributions cannot be altered for the first 24 months of the agreement, this is legal binding and there can be no variation meeting to alter this set condition.

The clause has been put in place to protect creditors so as they are guaranteed a fixed sum for two years. Otherwise an Insolvency Practitioner (IP) could set up an IVA proposal for a debtor to return 40p in the pound to creditors but call a variation meeting shortly after the IVA has been approved and lower the monthly payments to 35p or even 20p in the pound due to a change in the debtor’s circumstances. This means that an IVA has to be budgeted for realistically so as both debtor and creditor are aware of a fixed monthly payment that they can comfortably afford to pay out/receive each month.

Although this may seem harsh to people who become ill or lose employment, it is simply a way of keeping an IVA an effective and reliable debt solution
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If exceptions were made to certain circumstances, people would soon start finding further ways to exploit the system and an effective debt solution could lose its credibility. Therefore, it is vital that anyone seeking an IVA is sound in the knowledge that it is a legally binding contract and that they have to cope on an agreed tight budget for at least 24 months.

Many of us are facing up to the harsh realities of Christmas spending and are worried about the amount of debt that we have accumulated.

During the first few weeks of 2008, consumers were bombarded with demands for payments from creditors and the ‘wake up call’ for debt advice started to ‘ring in’ the New Year.

As people struggle with regular utility bills, larger credit card debt is starting to take its toll and people are struggling with spending amnesia as they try to work out where all of their hard-earned cash went! Many have faced the New Year with a bleak financial future ahead of them. It is now time for them to seek debt help and face their debt demons head on.

It is not possible to undo all of the debt that was accumulated during the holiday season but the New Year is a good time, to get to grips with a debt mountain and put your finances on a more even keel.

But how can you get rid of that Christmas debt?

A consolidation loan is an ideal way to stop the barrage of demands from creditors. You simply gather up all of last years debts and consolidate them into one, affordable low interest loan which is simply paid off each month. Any money saved could be used to build up a savings plan so as spending habits can improve and consumers have an account with something to show for their hard-earned weekly wages and a more improved credit rating.

Figures show that more and more people are seeking an IVA, as an appropriate means of tackling debt.

Manchester Business School has calculated that during 2006, 13,000 couples opted for an IVA in the UK which shows an increase by 165% when compared to the figures in 2004. In 2005, the average amount of debt resolved with an IVA was said to be £21,000 but two years on, this figure has risen to £42,000.

Figures are also expected to have increased during the last three months as interest rates push even more people towards an IVA, as a means of helping to relieve their mounting debt problems.

It is predicted that the number of people applying for an IVA, could reach a whopping 50,000 by 2010.

As housing prices and interest rates continue to rise, an IVA is an ideal way to keep creditors happy, as people with struggle with inflation. Statistics also reveal that newlywed couples are finding it difficult to cope with debt, after the expense of the wedding starts to kick in. Consumers under the age of 30 are also susceptible to huge money worries as they acquire debt from starting a family, buying their first home and financing social activities..

During the first quarter of 2007, over 13,000 people opted for an IVA, as it is a softer version of bankruptcy and allows debtors to keep their home. Will this trend continue in 2008?

In 2006, the IVA was a huge hit for those in severe debt. Although it was originally intended for small business owners rather than individuals, the IVA went from being an unknown debt solution to one of the best debt solutions available. As a result, the IVA expanded and mass advertising made it one of the most accessible and recommended debt solutions for the general public.

Many creditors are hoping that 2008 will be the year that the IVA bubble will burst. Some have become very hostile towards the IVA and are insisting on higher rates. Northern Rock voted against nearly every IVA proposal that was placed before them.

During 2005 and 2006, the IVA increased massively but this tapered off as creditors became more demanding and during 2007, the IVA lost its place as one of the most affordable alternatives to bankruptcy.

The need for IVAs is still here as personal debt goes through the roof and the sub-prime housing market hits rock bottom. Although this was primarily a problem for the US, the United Kingdom has suffered dramatically and people have been finding it increasingly difficult to re-mortgage their homes in the sub-prime sector. The United Kingdom has become swamped in debt and people are going to need every possible debt solution available to give them some breathing space to clear their backlog of mounting bills.

There have been many news articles urging caution over taking out an IVA (Individual Voluntary Arrangement) as an easy and effective way to get out of debt.

A recent report by Which magazine has been the main culprit along with many online blogs as people try to thrash out the pros and cons of an IVA.

An IVA is not an agreement that should be entered into lightly as it requires a long term commitment of five years and is only really suitable for those with debt above £15,000 as smaller debt can be resolved through debt consolidation or debt management . An IVA is a very favoured alternative to bankruptcy, but is not a quick fix solution to your debt problems.

The wording of the report in the Which article could be misunderstood and lead people to think that IVA companies are out solely to line their own pockets by making unscrupulous promises to clear debt and lure people into signing up to IVA schemes so as they can cream off the profits.

An IVA is the perfect debt solution for those who are happy to remain on a tight, budget for five years. Debtors should also be aware that they will not be able to obtain credit and opening a bank account could be impossible.

There’s only a few hours left until the end of the year – have you made your New Years resolutions yet? If you spent the most of 2007 worrying about your debt problems, commit to making 2008 the year you get rid of debt!

Resolution 1:
Get debt advice. Talk to a debt counsellor about your finances and see what options you have. Why do you need advice? There are many debt solutions, but the one best for you will depend on your personal situation. A debt counsellor can give you advice based on all the information you give them about your income, expenses, lifestyle and debt.

Resolution 2:
Decide how you are going to get out debt and take action! Whether that be by contacting banks and lenders for a consolidated loan, looking for a debt management plan, talking to an Insolvency Practitioner about an IVA, or visiting your local court for bankruptcy forms.

Resolution 3:
Make a budget (and stick to it!). Don’t let the same debt traps follow you into 2008. Plan out all your incoming payments and expenses and budget your finances. Once you have all your expenses written down, it’s easier to see where all your money is going and where you can make changes – for example, moving into a house with lower rent. Read our advice on increasing your income and reducing your debt for some further advice.

Resolution 4:

Many people are performing badly in the workplace as worries regarding debt, play on their minds.

Difficulties meeting debt repayments for utility bills, credit cards and personal loans are having a detrimental effect on the health of many employees. With Father Christmas waiting for us to fill his sack with goodies, the situation is likely to become even worse.

Debt and the Workplace

These days, employees are more likely to take time off work for matters relating to stress. At work, they will feel below par and may even turn to criminal activity in a desperate measure to meet the demands of their creditors.

When people are facing extreme debt and possible bankruptcy, outward signs begin to show in their personality such as short tempers, poor relationships with work colleagues and a less focused attitude towards their work.

Independent debt advice can provide a valuable crutch for employees to lean upon and many will benefit from debt consolidation as it can be an ideal way for them to condense outstanding debt into one affordable sum.

Instead of surfing the internet for pleasure or making personal phone calls, employees should use their leisure time to seek out IVA or debt consolidation advice. Many feel that bankruptcy is an only option and become even more desperate. However, there are many other debt solutions available. For those whose monthly expenditure is greater than their income, a debt consolidation loan may be the answer to their prayers.

People are curious at to the length of time an IVA (Individual Voluntary Arrangement) will take to set up, so detailed below is step by step information on how an IVA is arranged.

This schedule has been set out in accordance with the guidelines administered by the Court and Insolvency Act 1986. It will fluctuate according to each individual’s response time in completing and returning forms or requested information.

A typical time span could look something like this:

Day 1: Your case will be received by your debt management company.

Day 2: A receipt of acceptance will be sent out to you.

Day 7: You may be asked to supply any additional information regarding your IVA proposal.

Day 14: A draft agreement will be sent out for your perusal.

Day 16: You will need to apply to the court for an interim order which will protect you from any further legal action from creditors whilst the IVA is being arranged. This will protect you right up to the creditors meeting.

Day 18: Your interim order will be granted.

Day 32: Arrangements will be made for your creditors meeting and a ‘Nominees Report’ will be prepared. A nominees report is a detailed statement written by your Insolvency Practitioner to your creditors and outlines your IVA proposal.

Day 39: The creditors meeting takes place.

Day 60: You will receive notice if your IVA proposal has been accepted.

Reputable debt management companies receive up to 100 telephone calls per day from people who have been given poor IVA advice.

An IVA (Individual Voluntary Arrangement) is an ideal way to reach an amicable arrangement with creditors. This way the debt can be repaid in manageable monthly sums over a period of around five years.

Over the past two years, applications for an IVA have doubled. People choose this option to avoid the stigma associated with bankruptcy. It also allows them to hold on to their assets.

However, it is worth bearing in mind that an IVA may not be the ideal solution for everyone as they do incur fees. Many people are overcharged for an IVA and bogus firms are charging customers large upfront fees for an inferior service. Hence the reason why IVA advice should be sought from reputable debt management companies.

A reputable debt advisor will ensure that he has satisfied set criteria before an IVA is recommended. One of these stipulations is that a debtor must have a minimum of £200 cash per month to survive on and he/she must owe money to at least three individual creditors.

An example of bad IVA advice can be found when a debtor is told that an IVA will not show up on credit records when in fact, it will. However, an IVA can be set up in as little as six weeks and all of your creditors will be taken off of your hands. You simply pay an agreed, affordable monthly payment to your Insolvency Practitioner, which will include a percentage for his fees.