It may not be possible to start an IVA if you only have one debt. If this creditor rejects the proposal the agreement can’t go ahead.
- Can you start an IVA with only one debt?
- Should you consolidate before an IVA?
- Will including debt to Friends and Family help?
- Options if your IVA is rejected
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Can you start an IVA with only One Debt?
In order to start an IVA the creditors involved have to accept your payment proposal. Acceptance requires at least 75% of your creditors by value who vote to say yes.
If you only have one debt or a single creditor that makes up more than 75% of your total debt they alone will decide whether to accept your proposal. If they refuse the Arrangement cannot go ahead.
Given this it is possible to start an IVA with only one debt if that creditor is prepared to support it. If they are not or make demands which you cannot agree to you will need to consider a different solution.
A single major creditor may demand significant changes to your IVA Proposal before they will accept it. If you cannot agree to these the Arrangement will not go ahead.
Should you Consolidate Debt before starting an IVA?
If you are unable to pay your debt you might consider consolidation. This is where you take out a larger loan to pay off multiple smaller debts.
In theory this improves your situation as the new loan repayment should be less than the total payments you were previously making. However it will cause a problem if you struggle to pay the new loan payment.
Given you are still struggling you may now wish to consider starting an IVA. However your chances of doing so will be significantly reduced because you only have a single large creditor rather than a number of smaller debts.
Think carefully before consolidating debt with a secured loan against your property. If you subsequently struggle to pay this debt can no longer be included in an IVA.
Will including Debt to Friends and Family help?
Debt owed to friends or family can be included in an IVA. The advantage of adding them is that their agreement could be sufficient to ensure the Arrangement is accepted.
When included you will be able to count on your friends or family to agree to your proposal. As such if you only have one debt or just 2-3 who may or may not vote at all adding friends and family will ensure your IVA goes ahead.
Of course a downside of involving your friends and family is that they will then find out the full extent of your financial situation. As such it is best to explain it to them before hand to ensure they will be supportive.
Friends and family may not receive payments through your IVA in the same way as standard banking creditors. However after it has ended there is nothing to stop you repaying them in full.
Options if your IVA is Rejected
It is important to understand that your IVA could be rejected if you only have one debt. As such before making starting your application you need to understand what happens in these circumstances.
Firstly it is important to understand that you will not be forced to go Bankrupt. You will be able to choose what to do next and the alternative debt solution which is best for you.
You could of course decided that you want to go bankrupt. If you are not a home owner and do not own an expensive car then this could be the next best option for you.
HMRC are one of the few creditors who might decide to make you bankrupt if an acceptable IVA proposal cannot be agreed.