Sometimes an IVA requires the sale of certain assets or the surrender of insurance policies etc. It is your responsibility to do this, and you will normally have three months to sell or release assets. It is best to start the sale process and send us the funds as soon as possible, because failure to hand the proceeds to the Supervisor on time can cause the IVA to fail.
Letters and phone calls from your creditors for the first 90 days of an IVA are normal and require no action. A “Chairman’s Report” outlining the outcome of the meeting of creditors has been sent to all people you owe money to and this confirms that your IVA has been approved.
Sometimes creditors and their collection agencies take time to update their records. Simply advise them that your IVA has been agreed and that they should have received a copy of your Chairman’s Report.
Always check on Appendix D of your proposal for all creditors that are included in the IVA. If a new creditor comes to light, check that you agree with the amount of the debt and forward the letter onto us. Please also include a covering letter telling us why this debt wasn’t originally included. We can almost always include overlooked creditors.
Note that new debts added into the IVA can decrease the dividend payable to your creditors. Each case is reviewed individually and your Supervisor will tell you what needs to happen next.
Remortgage: There may be more equity in your property than you realise, and a re-mortgage can be a realistic way of ending your IVA early. You may even be able to make a proposal to introduce equity early in full and final settlement of your IVA.
Sale of Property: As with a re-mortgage, there may be equity in your property that would allow you to settle early. Selling your home may seem drastic, but it can mean a fresh start in life. If you are fortunate, you may be able to retain a sum of equity to enable you to start over.
Third-Party Funds: Sometimes a family member or friend will offer a lump sum so you can suggest early settlement to your Supervisor. Most creditors will accept a reasonable offer from your Supervisor, in order to conclude your IVA early.
Once you have defaulted on your contractual payments, and received a default notice, this can be registered on your credit file. The default will show for a minimum of six years, so your credit rating is affected during the IVA and for a year after. The IVA is also registered on your credit file. Note that if someone checks your credit rating for another reason, such as a potential landlord, your credit rating may become an issue.
Once the order is granted, the court will contact the Official Receivers’ office and tell them that the order has been made. A representative of the Official receivers’ staff will then ask you to attend an interview at their offices to discuss your financial circumstances.
You will be requested to complete and return a questionnaire prior to this interview. Once the Official Receiver has all the relevant information he will decide what assets, if any, will be taken from you. He’ll also assess your income and expenditure to determine whether or not to make an income payments order as well.
Your credit rating will be affected by bankruptcy. Credit reference agencies such as Experian, Equifax and Call Credit maintain records of your credit accounts. Failure to maintain contractual payments towards any debts will result in a default notice being made on your credit file.
These notices will remain on your credit file for 6 years (unless the creditor agrees to remove them prior to this) and may affect your ability to obtain credit.
Contact from creditors may not stop immediately, but your unsecured creditors are bound by the terms of your IVA. They must cease to pursue all legal action for recovery of unsecured debts. In practice, they may take six to eight weeks from the date of approval to catch up.
Large banks and credit houses and other lenders are not always efficient at communicating the change to their various departments, and the debt collection department may be the last to hear of an approved IVA.
Creditors or debt collectors who tell you that they “do not accept IVA payments” or that the IVA insolvency practitioner has never contacted them are just trying to get money out of you, and you do not need to make payments to them outside of the IVA.
Bankruptcy is a legal process that can be started if you can’t afford to pay all of your debts. It can also be started by someone else if you owe them more than £750. Bankruptcy allows you to reduce overwhelming debt and make a fresh start. A “Trustee in Bankruptcy”, (the person appointed to deal with your assets) sells your assets and distributes the proceeds to people you owe money to, to recoup as much debt as possible.
After your bankruptcy ends, the people you owe money to can’t make further claims against you. However, bankruptcy brings with it certain implications. For example, if you rent your home your landlord is told and your employment may be at risk in some occupations and professions.
When you make yourself bankrupt, all of your assets automatically become the possession of your Trustee in Bankruptcy. He/she has the authority to dispose of them without your consent.
However, you are able to retain tools, books and vehicles that are considered essential for employment. You can also keep clothing, bedding, furniture and household equipment needed to satisfy the basic domestic needs of yourself and your family.
The assets which the Trustee in Bankruptcy can take are as follows:
- Any interest you may have in property, even if it’s held in joint names with a spouse or partner
- Any shares, bonds, endowments and savings policies
- Any funds held in bank or building society accounts
- High value assets such as motor vehicles and jewelry, although a suitable lower cost replacement can be provided instead
- Lump sums from private and occupational pensions if they mature during the bankruptcy. The Trustee may also be entitled to subsequent pension payments for up to three years.
You can also face having to pay part of your monthly or weekly wage, either with your consent or through a court order. This order is based on you contributing any surplus income and will last for a maximum of three years from the date of bankruptcy.
If you acquire any asset during the term of your bankruptcy you have to advise your Trustee, who will release it for the benefit of people you owe money to. Example assets include:
- Inheritances, including property, cash, investments and any other asset of value
- A windfall from a win on the National lottery, football pools or bingo
- Money received after the date of bankruptcy but before the date of discharge from your bankruptcy
It is now unlikely that Bankruptcy Orders will be advertised in a newspaper in your local area. Details are placed on the Government’s publicly available Insolvency Service website.
Anyone who you have had a financial relationship with will be told of your bankruptcy, including banks and building societies, mortgage and secured loan companies, hire purchase companies, your landlord, people you owe money to and pension and insurance companies.
All of your bank accounts will be closed and any funds in them used by the Trustee to pay people you owe money to. If an account is in joint names with your spouse or partner then only half the funds can be taken. You’ll be allowed to open a new bank account with the authorisation of your Trustee.