What happens at end of IVA?

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Overview:

This article will explain everything you need to know about your IVA coming to an end, from how your mortgage prospects will change to how to heal your credit score.

When you enter an Individual Voluntary Arrangement (IVA), your final payment can feel like a lifetime away and it can be impossible to imagine a life without debt.

However, it can be useful to know what happens at the end of an IVA when you make your final payment and are officially released from your debts.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal debt solution designed to help you repay a portion of your unsecured debt through a series of monthly payments over a set period.

When you apply for an IVA, you’ll be assigned an Insolvency Practitioner (IP) licensed by the Insolvency Service to set up and manage your arrangement. They will calculate your monthly IVA payments and distribute them among your creditors.

During an IVA, all interest and charges will be frozen and your creditors won’t be able to contact you, ask you for payment, or take action against you in relation to the debt. This allows you to make manageable payments towards the debt without the threat of legal action hanging over your head.

How long does an IVA last?

An IVA typically lasts five years, but you may be able to exit your arrangement early.

For example, if you come into money and can repay the debt in full with a lump sum, you may be able to leave your IVA. This is called a ‘full and final settlement’ and can prevent you from having to make payments for five years.

Similarly, if you fail to repay the amount disclosed in your IVA proposal within five years, your payment term can be extended to six years to allow you to make up for the additional payments. This can happen if you have a payment break, lower your payments, or fail to release equity from your home.

IVAs are also added to your credit files from all of the major credit reference agencies (Experian, Equifax, and TransUnion) for six years and a public register called the Individual Insolvency Register (IIR) until three months after your final payment.

How does the IVA process work?

The IVA process can be broken down into four simple steps and typically takes between four and five weeks to complete.

We’ve outlined the basic steps you can expect when you apply for an IVA below:

Meet with an Insolvency Practitioner (IP)

The first thing you must do is discuss your financial situation with a licensed Insolvency Practitioner (IP) or debt management company who will arrange for you to be assigned an authorised IP.

They will carry out a full financial health check to determine whether you’re a suitable candidate for an IVA or suggest alternative debt solutions better suited to your financial situation.

Create an IVA proposal

The next stage involves your IP getting to work creating an IVA proposal, which is a document designed to help your creditors understand your financial situation and how you play to repay your debt.

Generally, the more details you include in your IVA proposal, the more likely your creditors are to accept your IVA.

Await your creditors’ decisions

Once you have signed off on your IVA proposal, it will be sent to your creditors for approval. The creditors representing 75% of your debt must agree with your IVA proposal for your IVA to go ahead.

The name of this process is called a ‘meeting of creditors’ or ‘creditors meeting’, but this is simply the name given to the deadline for which they must cast their votes and it’s important to note that your creditors don’t physically meet in person to discuss your debt.

Start your IVA

Finally, after your IVA proposal has been approved by a majority of creditors by debt value, you will be presented with a final version of your IVA outlining your legal responsibilities and when your IVA is expected to end.

From this point onwards, you will be legally protected by the IVA. This means your creditors can’t contact you, add interest or charges, or take legal action against you.

This is also when you’ll be informed of your first payment date which will typically be within 30 days of the phone call informing you that your IVA has been approved.

What happens at end of IVA?

Whether you’re nearing the end of your IVA or have just made your first monthly payment, you may be wondering what happens at the end of an IVA.

Here are some of the things you can expect to happen after your IVA comes to an end:

Your debt will be written off

One of the main advantages of an IVA is that any debt left over at the end of your payment term will be written off.

This means that the debt disappears and you no longer need to pay it – even if you only repaid a small portion of the debt through the IVA.

The disposable income you were paying into your IVA will also be freed up for you to spend on whatever you wish. Most people choose to put it towards day-to-day expenses or deposit it into a savings account.

You’ll receive a completion certificate

Once your IVA ends, you’ll receive an IVA completion certificate confirming that you’ve successfully completed your arrangement – this can be used as proof to future lenders that you’ve made all payments as agreed and are a reliable borrower.

Usually, you’ll be issued with your IVA completion certification as soon as your IP has completed all the necessary checks. This can take between three and six months.

Your credit score will improve

While an IVA will initially damage your credit score and stay on your credit file for six years, your credit rating will gradually improve as your IVA ages.

So by the time you’ve made all the necessary payments, your credit score should be in a better position than it was at the beginning of your IVA. This will provide you with a good basis for improving your credit score and make it easier to get approved for credit if necessary.

Your entry will be removed from the register

By the time you’ve been free of your IVA for three months, your entry will be removed from the IIR and you should find it easier to get a lender to approve you for credit.

However, if you check the register after this time and your details are still visible, there may have been a delay and you should ask the Insolvency Service to update their records as soon as possible.

Can I get a mortgage after an IVA?

The chances of you getting a mortgage during an IVA are extremely slim, but you should find it a little easier after you’ve completed an IVA.

However, because your IVA will likely still be visible on your credit file for another year, it may be worth waiting until there is no mention of your IVA anywhere on a public record or your credit report before applying for a mortgage. This can also give you more time to save up for a larger deposit which will result in lower monthly mortgage payments in the long run.,

Even if the IVA is no longer listed on your credit file, some lenders will still ask if you’ve had an IVA in the past and you must be open and honest about any past financial troubles. This can affect whether or not they decide to lend to you and on what terms.

Most people who get a mortgage after an IVA do so through a specialist lender, who is a lender that specialises in finding mortgage deals for people with past debt problems.

Do I have to notify my creditors that my IVA has ended?

When your IVA ends, you don’t have to do anything as your IP will notify the main credit reference agencies and your creditors that your IVA has ended and everything has gone according to plan. This should mean your creditors don’t contact you again and your credit record is updated to reflect your completed IVA.

IPs are also responsible for informing the Insolvency Service of your finished IVA. They will then remove your entry from the IIR once they’ve confirmed everything is correct and you no longer owe anything towards the debt.

Remember, your IVA will remain on your credit report for six years from the date it was approved. This means that, if you complete your IVA in five years, it will stay on your credit file for another year after your official discharge date.

How can I heal my credit rating after an IVA?

There are several things you can do to boost your credit score and get your finances back on track after an IVA. Here are some of the actions that can have a positive impact on your credit score post-IVA:

Register to vote

One of the quickest ways to give your credit rating a much-needed boost after an IVA is to register to vote if you haven’t already.

This is because, when you register to vote, your electoral details are recorded on your credit report and lenders will be able to cross-reference this information to confirm you are who you say you are, ultimately ruling out identity fraud.

Registering to vote can also help you save time if you were to apply for further credit as lenders will be able to access all the information they need in one place without asking for further details from you.

Avoid further debt

Completing an IVA is no easy feat, but it doesn’t mean your finances are fixed forever and you should still take steps to avoid further debt.

This can be done by avoiding further credit unless absolutely necessary and only borrowing money if you’ve exhausted all other options first.

Making too many credit applications within a short space of time can make it look like you’re overly reliant on credit and this can make lenders wary of entering into a credit agreement with you. Even if you’re only asking to borrow a small amount, each application can record a hard search on your credit report, which is visible to lenders.

Make payments on time

The ability to make payments in full and on time is a key indicator of your creditworthiness in the eyes of a lender.

By proving that you’re capable of sticking to the terms of your other financial obligations each month, you can show lenders that you can handle credit responsibly.

This is especially true for old, well-managed accounts as it proves that you’ve been making timely payments for a prolonged period.

Check your credit file

The information contained on your credit file is usually correct, but mistakes still occur.

Once you’ve exited your IVA, it’s worth checking your credit file to ensure all the information contained is accurate and there are no incorrect or duplicate entries dragging your credit score down.

Something as simple as a wrong address or a misspelled surname could be enough of a reason for a lender to refuse your application, but this problem can be easily rectified by contacting the credit reference agency directly and raising a dispute.

Get a bad credit card

The idea of getting a credit card so soon after an IVA might seem counterintuitive, but some credit cards are designed to help you rebuild your credit history and show lenders that you’re a responsible borrower.

They typically have low spending limits and high interest rates so are best used sparingly for purchases that you would have made anyway. However, they can only help boost your credit score if you remember to pay off the balance in full each month to avoid hefty interest charges.

Conclusion

The end of an IVA can feel like a distant dream if you’ve only just started your arrangement, but five years can fly by and knowing what to expect can help you get there.

Once you’ve made your final IVA payment, you’ll be released from your debts and can begin your journey to financial freedom.

This will put you in a good position to rebuild your credit score and you should find it easier to access most forms of credit, from a mortgage and a loan to a phone contract and a bank account.

Key Takeaways

An Individual Voluntary Arrangement (IVA) is a formal debt solution where you agree to make monthly payments towards your unsecured debt for five years
Once your IVA has come to an end, any remaining debt will be waived and you'll be declared debt-free
Within three months of completing an IVA, you should receive a completion certificate as proof
Within three months of completing an IVA, you should receive a completion certificate as proof
Don't forget to take steps to improve your credit score after an IVA
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:

HISTORY

Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

May 31 2024

Written by
Maxine McCreadie

Edited by
Ben McCormack

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