Debts We Can Help With
Many kinds of debts can be included in an IVA – not just debts from personal borrowing. There two ways debt can be handled in an IVA, as an expenditure item or as Included as a creditor
In the context of an IVA, debts are referred to as either an expenditure item or included as a creditor.
An expenditure item
When entering into an IVA, a calculation is made to determine your available disposable income. This establishes how to much you to have to pay towards your non-priority debts once you've paid for your living expenses, important obligations and priority debts. Your available disposable income is how much you pay into the IVA.
So, priority debts and other important obligations are said to be excluded from an IVA but are an expenditure item used to determine the IVA payments.
Included as a creditor
A creditor in an IVA represents a negotiable debt. It is these debts which are said to be included as a creditor in the IVA and cleared once the IVA completes.
Included as a creditor
Examples of such debts include:
- Personal borrowing: loans, credit cards, store cards, payday loans etc
- Gas, electric or water bills (from a previous address and supplier).
- Catalogue debts.
- Overdrafts old banks accounts.
- Overdrafts current bank account (once you close it)
- Disconnected mobile phone bill.
- Rent arrears (from a previous address).
- Some items bought on finance.
- Car Finance (only if you no longer have the car).
- Benefits and DWP (Department of Work and Pensions) overpayments as long as you are not still in receipt of the benefit.
- Guarantor loans (can be complicated)
- Mortgage or secured loan shortfalls (only if you no longer own the property)
Any service which you’re no longer using where the money is outstanding has the potential for inclusion, e.g. school, nursery, solicitor, dentist etc. Contact us for advice about any specific debt you have.
Debts as an expenditure item
Examples of such debts or obligations include:
- Secured loans (current)
- Mortgage and mortgage arrears (currently still owning the property)
- Council Tax Arrears (If a bailiff has visited and entered the property or the arrears are already under arrangement)
- Car finance (if you still own the vehicle)
- Any form of High Court action
- Court fines or parking fines
- Rent arrears (current address)
- Utility bills (with the current provider)
- Logbook loans (as secured on a vehicle)
- Accounts for pay weekly goods providers such as Perfect Homes and Studio (as they will reclaim the goods if payments not received)
- Any government-funded loans such as student loans, budgeting loans or budgeting advance
- Any fine or penalties imposed by a court
- Liabilities arising under an order made in a family or domestic court action such as claims for child support
- Liabilities arising under a confiscation order made under S.1 of the Drug Trafficking Act 1986 or S.71 of the Criminal Justice Act 1988.
Council Tax debts and IVAs
Your council tax is one of the most important household bills. If you enter into an IVA, then it must be dealt with one way or another.
Council tax arrears from previous years
Council tax arrears from previous years as treated as any other unsecured debt in the IVA.
Council tax for the current year
This, for years, has been a grey area.
Sometimes it is an expenditure item; sometimes it is included as a creditor.
Either way, it does not make much difference to you, the IVA holder.
If the current year’s bill is included as a debt, then that raises your disposable income to pay into the IVA until you need to make payments for the next years bill. At that point, your IVA payments are lowered to allow you to afford this.
If the current year’s bill is included as an expenditure item, that lowers your disposable income to pay into the IVA.
Factors influencing how the current year’s council tax is treating include:-
- who the council is and their voting habits,
- the total share of the debt owed to the council,
- if there are arrears from previous years,
- is the current year in arrears? and the point in the year we are at,
- the view the insolvency practitioner