Having an IVA will not usually affect your job.
But if you are in certain professions, such as solicitors and accountants, having an IVA may mean that you can no longer practice, or may practice only subject to certain conditions.
If you are worried about the impact of an IVA on your job, check the terms and conditions of your contract to see if it says anything about continuing to work when you have an IVA.
Everyday possessions such as items you use in your home are not affected by having an IVA.
However, if you own more expensive items, such as antiques or expensive jewelry, you may want to consider selling these to help pay your debts.
Assets are things you own that have significant value, such as a home, land or a car.
You don’t need to have any particular assets to get an IVA but they may help you to pay your debts. Assets can be included in the IVA, which means you will sell them and use the money to pay the creditors.
If you are a homeowner, check the special rules about how your home is treated (below).
If you decide that an IVA is right for you, your insolvency practitioner will discuss your assets with you and whether these should be included in the IVA or whether you can keep them.
You must tell the insolvency practitioner about all your assets. If you don’t, you will be breaking the law.
Any assets that you want to keep, such as a car, must be specifically excluded from the IVA.
If you don't want to include an asset and the insolvency practitioner doesn't think the creditors will agree, the proposal won't be put forward.
Remortgaging your home
If you own your home, its value will be taken into account as part of your IVA.
This means, in the final year of your IVA, you will have to get a valuation of your home to find out how much equity is in it. Equity is the money you'd make from the sale of a property, after any mortgages are paid off.
If the valuation shows there is more than £5,000 equity in the property, you will usually have to re-mortgage your home to raise a lump sum to put into the IVA. But you should not have to sell your home to do this.
With most IVAs there is a limit on the amount that you will be expected to raise by remortgaging. The limit is based on the value of your home and the amount of the mortgage that you already have. You will not usually be expected to remortgage if the new mortgage would extend beyond the existing mortgage term or beyond your state retirement age.
If you can't re-mortgage, you'll continue to pay the usual monthly contributions under the IVA for a further twelve months instead.
Can you keep your home out of an IVA?
In extreme circumstances, you may be able to keep your home out of the IVA. But your creditors may not want to agree to this.
An insolvency practitioner will be able to advise you about your particular situation.
If you’re not sure, get advice.
Future income or assets
Having an IVA may affect any future income or assets that you receive.
For example, if you decide to move house while you have an IVA, any money you make from the sale might have to be paid into the IVA.
If your income increases while you have an IVA, you have to declare it to your insolvency practitioner. If you don't, you could be breaking the law.
Most IVAs contain a windfall clause.
A windfall is money you receive unexpectedly, for example, winning the lottery, inheriting a house or getting a large bonus payment. If your IVA has a windfall clause, you will have to pay any windfall money into your IVA.
If it’s likely you're going to receive an inheritance or large bonus or gift within the next five years, you should think carefully about whether an IVA is suitable for you.
If you have an IVA you may find it difficult getting credit in the short term. You may be able to get credit for personal household goods and services.
If you own your own business you may be able to get credit for business goods and services. However, you may be charged higher interest rates. This could cause you to get into more debt that you can’t afford to pay.
If you want get more than £500 of credit you must get written permission from your insolvency practitioner, unless the credit is for public utilities such as water, gas or electricity.
How will creditors know about the IVA?
Details of IVAs are kept in a public register called the Individual Insolvency Register. Details of your IVA will stay on the register for the length of the IVA. They will be removed three months after the IVA has ended. When you apply for credit, the creditor may check this register.
Details of the IVA will also be kept on your credit reference file by credit reference agencies. Creditors will check your credit rating on your credit reference file before agreeing to lend to you.
Will an IVA affect your credit rating in the long term?
Once the IVA is completed, your details will be removed from the Individual Insolvency Register after three months. Details of the IVA will be held on your credit file for six years from the date that the IVA starts.
If you get an IVA, you may need to change your bank account while the IVA is being set up. This is because your bank may be able to automatically take money from your account to pay any unpaid debts. This is called the 'right to offset'. A bank can only do this if your bank account is linked to the company you owe the debt to.
If your bank is linked to your debts, you need to switch your bank account. That way, your income will be safe.
If you're bank account has no links with your debts, you won't need to change it.
If you decide to get an IVA, your insolvency practitioner will be able to advise you about this.
How do you know if your bank account is linked to your debts?
Your bank account may be linked to one of your debts in the following ways:
if you have a loan or credit card debt and a current account with the same bank
your loan or credit card debt is with another company, but that company is owned by your bank
your bank and the creditor are owned by the same umbrella company.
If you have savings, you usually have to include these in your IVA, either by paying your creditors a lump sum or using the money to make monthly repayments.
If you're getting your state pension, it will be taken into account when you work out how much you can afford to pay into an IVA.
Personal or occupational pension
If you receive an income from a personal or occupational pension, it will be taken into account when you work out how much you can afford to pay into an IVA.
If you receive a lump sum as part of a personal pension, you may need to agree to pay this into your IVA.
If you are still paying money into your personal pension, creditors may ask you to stop paying into the pension and use the money to pay them instead. You would have to do this for the length of the IVA, usually five years.
However, IVAs are flexible and if it's vital you continue to pay into your pension, it may be possible to compromise. Your insolvency practitioner can advise you about this.