An IVA is used to manage unsecured debts. Things like Bank loans, Credit Cards, CCJs and HMRC debt can all be included.
- The debts that can be included in an IVA
- Can a CCJ or Tax Debts be added?
- Which debts have to be excluded
- Can you leave debts out?
The Debts that can be included in an IVA
Almost any unsecured debt can be included in an IVA. The most common types are credit cards, bank overdrafts, personal loans, catalogues and store cards. However there are a number of others.
If you have a payday or doorstep loan these can be added. This is the case even if the representative from the doorstep loan company collects the payment from you in person.
Utility bill and and Council Tax arrears also fit into the category of unsecured debts. As such these can go into an IVA. However depending on their size it may be easier to pay them yourself once the Arrangement is in place.
It may be an advantage to add debt owed to friends and family into an IVA. You are allowed to repay them in full but not until after the Arrangement has finished.
Can a CCJ or Tax Debts be added to an IVA?
If any of your creditors has a CCJ against you this debt can still be included in an IVA. Once the Arrangement is in place the Judgment is overturned. Any payments you have been making towards it then stop.
The same thing applies where an Attachment of Earnings has been issued. This debt can also be added. As soon as the Arrangement is agreed no further money can be taken from your wages.
Money owed to HMRC also goes into your IVA. As such Tax Credit over payments can be dealt with using this type of agreement in addition to income tax or VAT arrears.
The fact that HMRC debt can be included in an IVA means that the solution is ideal for self employed people and company directors.
Which Debts have to be excluded from an IVA?
Secured debts cannot go into an IVA. Theses are things like a mortgage or any other debt secured against your home such as a Charging Order. Most car finance debts are also excluded as they are secured on the vehicle.
You can make the necessary provision in your living expenses budget to enable you to continue paying these debts once the Arrangement is in place.
There are some debts that are unsecured but are nevertheless exempt from an IVA. These include Student Loans Company debts, child support agency arrears and court fines.
If you owned a property or vehicle which has been repossessed you are still liable for any shortfall. However this can be included in an IVA as it is now an unsecured debt.
Can you leave Debts out of an IVA?
You do not have to include all your unsecured debts in an IVA. However it is best to do so. If you leave a debt out you will be liable to keep paying it. The issue is you will struggle to do this.
You cannot add an allowance in your living expenses to maintain an unsecured debt. The other creditors in the Arrangement would view this as unfairly preferential treatment and would be likely to reject the proposal.
One possibility might be to leave out a debt and keep paying it with money saved from your agreed expenses budget. However this will put you under financial pressure which could lead to the failure of your IVA.
If you need a credit card to pay for business expenses it may be possible one active. However the balance must be zero and paid in full each month. In addition if you owe money to your employer the repayments towards this debt could be maintained if failing to do so would jeopardise your employment.