Does an IVA cover all of my debts?

Does an IVA cover all of my debts?In an Individual Voluntary Arrangement only unsecured debts can be included for repayment. Unsecured debts are financial obligations that are not linked to any specific collateral or asset.

These can include credit card debts, personal loans, payday loans, store card debts, overdrafts, and other forms of unsecured borrowing.

By entering into an IVA, an individual can consolidate these debts into a single affordable monthly payment. The IVA process involves working with a licensed insolvency practitioner who negotiates with creditors on behalf of the debtor.

The aim is to agree on a reduced repayment plan, often spanning five to six years, with the possibility of writing off a portion of the debt.

This allows individuals to regain control of their finances, avoid bankruptcy, and work towards becoming debt-free.

What debts can be cleared with an IVA?

Priority debts and priority debt arrears cannot be included in an Individual Voluntary Arrangement. These debts are considered essential and must be prioritised for repayment.

Payments towards these debts are factored into the individual’s monthly household expenditure allowance within the IVA. Some examples of priority debts include:

  • Mortgages and secured loans
  • Rent & property service charges
  • Current utility bills
  • Current service providers
  • Hire purchase payments
  • Student Loans
  • Child Maintenance
  • Council Tax (current year if not in arrears)
  • Court fines

Debts that can be included in your IVA are as follows:

  • Unsecured debts (overdrafts, credit cards, store cards, charge cards, catalogues, pay day loans, unsecured loans, doorstep loans, credit unions)
  • Unsecured debts that have a CCJ or attachment of earnings in place
  • Arrears from utility supplies from previous properties, previous suppliers e.g. gas, electricity, water
  • Arrears from service providers from previous properties, previous suppliers e.g. digital TV, mobile phones, landlines
  • Debts that were previously secured against an asset that has been repossessed – shortfalls on vehicle HP and Properties
  • Debts to family and friends.
  • HM Revenue and Customs VAT, PAYE, Self assessed tax, National Insurance
  • Council Tax (previous years and current year if in arrears)

Council Tax Debts And IVAs

Council tax debts and how they are treated within an Individual Voluntary Arrangement (IVA) can vary depending on various factors. Council tax arrears from previous years are typically treated as any other unsecured debt in the IVA. However, the treatment of council tax for the current year can be more nuanced.

In some cases, the current year’s council tax bill may be considered as an expenditure item within the IVA, reducing the individual’s disposable income available for repayment. This means that the IVA payments would be based on the remaining funds after accounting for the council tax bill.

Alternatively, the current year’s council tax bill may be included as a debt within the IVA, which would increase the individual’s disposable income available for repayment until the next year’s bill becomes due. At that point, the IVA payments would be adjusted to accommodate the new bill.

The treatment of the current year’s council tax within an IVA can be influenced by factors such as the voting habits of the council, the share of the debt owed to the council, the presence of arrears from previous years, whether the current year is in arrears, and the perspective of the insolvency practitioner handling the IVA.

It’s important for individuals considering an IVA to discuss the specifics of their council tax debts with their insolvency practitioner to understand how they will be treated within the arrangement and how it may impact their repayment plan.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.