The issue of life after an IVA when you have made all your monthly payments and the IVA is completed is frequently neglected, yet we feel it’s critical.
With such a large amount of information to take in during the set-up procedure, this question doesn’t surface until later. But after everything has settled down and you’ve had time to reflect, you might find yourself asking what will happen at the conclusion of your Individual Voluntary Arrangement when it’s completed successfully and your unsecured debt has been paid.
Await Your Certificate of Completion
When you’ve completed your IVA, your Insolvency Practitioner will give you a Certificate of Completion and notify your creditors that the process is finished. The certificate is also given to the Insolvency Service so that your details can be removed from the individual insolvency register which can be viewed here (which normally happens 90 days (3 months) after the Certificate has been issued).
Time to Celebrate your Financial Freedom
Once your Individual Voluntary Arrangement is completed, then congratulations on reaching freedom from your debts. You have once again taken control of your finances and achieved financial freedom through repaying debt through your IVA. Do whatever you want with your money! First off, its time to celebrate the fact that you completed your IVA program!
After being frugal for the past few years living within a strict budget, you deserve a celebration. This doesn’t have to be an expensive grand affair. Instead, opt for something more realistic like drinks with friends or dinner with family. Whatever you do to celebrate this milestone, make sure it is memorable!
Check Your Credit File
A record of your IVA will remain on your credit file for six years from the date your IVA began. This may be as soon as you make your final payment if you were in a 6-year IVA. Or, it could take up to 12 months after your agreement ends for a standard 5-year IVA. However, in any event, the reference agencies will update their records during this time to reflect the fact that your IVA has completed.
You can start taking a look at your credit report prior to completion of your IVA to identify whether any of he default dates registered by your creditors are dated later than the approval date of your IVA.
If this is the case with any creditor, you should contact them with evidence of your approval date so they can update your credit report. This will ensure all adverse information will be removed from your credit files no later than the removal of your IVA details.
Your IVA provider can’t update your credit score, only your creditors can – and they are given a copy of your final report which should trigger them to do the update. It’s understandable that you would want to see an improvement on your credit score – so keep an eye on it after your IVA completes.
If you are experiencing difficulties with any of your creditors not updating their records with the reference agencies in a timely manner, you should initially contact the creditor directly to remedy this.
However, if you still experience issues getting your files updated, it is in your interests for you to take a copy of your ‘Certificate of completion’ and send it to the Credit Reference Agencies (CRA) directly to enable them to update their records showing your IVA was successfully completed which may improve your credit score.
The main CRA’s are:
Consider Sticking to the IVA Budget After Completion
If you were in an IVA, every penny is accounted for and any disposable income is paid into your arrangement. You now have that sum of money to enjoy yourself come the end of every month.
However, please make sure that you don’t let yourself fall victim to bad spending habits as we ideally want you to succeed with your newfound financial freedom and not be having to talk to you again in the years to come.
If there is any benefit to an IVA other than the fact it helps you get out of debt and teaches you how to budget to help save for those bigger items over time such as a new car, a holiday or towards a deposit on your next home.
You’ve already managed to do it without this money; you can certainly accomplish it again. You may use various phone applications to help you better budget and lets you keep track of your finances in one place to make realistic budgets, monitor your expenditures and set yourself savings goals.
Rebuilding your credit rating
After you finish your Individual Voluntary Arrangement, obtaining credit will be difficult, so it’s best to wait a few months before applying for a credit building credit card or borrowing money. If lenders do any hard credit checks, it can affect your credit rating and credit score.
To maintain good borrowing habits, aim to spend no more than 25% of what you’re offered (or in the worst case, keep the balance under 50% of the total credit limit. Ideally, a sensible approach would be to spend token amounts each month such as when you refuel a vehicle and then to repay the balance in full each month so as not to incur any interest charges.
Mortgage after an IVA – Is it Possible?
Once your IVA is completed, the great news is that it is possible to get a mortgage. This is the case whether you want to purchase a new home or remortgage to release equity from your current property.
Because you have been in the Arrangement it may prove more difficult to directly approach the standard High Street mortgage credit lenders. This is particularly the case in the immediate aftermath of your IVA as a significant number of lenders will require your IVA to have been completed for at least 3 years.
So, The longer you are prepared to wait before you apply, the better mortgage deal you are likely to get. Generally speaking if you apply immediately you will need a deposit of 15%-20%. However if you wait for 6 years or more from date your IVA started this can reduce to just 5% as your details will have been removed from the insolvency register. The rule of thumb is the bigger your deposit, the better your chance of securing a mortgage deal.
The best course of action would be to speak to a specialist mortgage broker that has experience of placing former IVA clients with lenders that are more sympathetic to your circumstances (and yes, this does include the possibility of being places with a high street lender at a competitive rate).
Start Saving Towards your Future Goals
It’s a great idea to have some money saved up for a rainy day or towards a high value goal. You can easily do this after your IVA has completed by setting aside a small amount of the money each week or month that you were previously paying towards your IVA.
Putting little amounts of money aside allows savings to accumulate without even realising. To ensure you are saving, you could set this up as a direct debit or standing order with your bank so that the money is taken immediately after you receive your regular income and to deposit it into your savings account; this way, you won’t have to worry about doing so.
What Can you Do if Your IVA Has Failed?
If you are unable to maintain your IVA payments the Arrangement may fail. If this happens your debts are likely to remain outstanding after your IVA has been terminated.
IVAs can fail for a variety of reasons but the overwhelming majority are due to a significant build up arrears without any explanation as to why. Or, failure to declare significant assets such as a property at the outset of setting up your IVA. Another reason is failure to co-operate with the requirements to complete and annual review of your income and expenditure.
During the term of your IVA, your situation can change and your income may go down or your expenditure increase more than any rise in your income. The key here is communication as this can help keep the IVA on track through a variation of the original terms.
However, in some cases, IVA failure is unavoidable and you will then have to look at an alternative debt solution to manage your debts. You have the option of starting a Debt Management Plan via a debt charity such as Step Change, going Bankrupt, entering a Debt Relief Order (DRO) or even starting a new IVA by contacting an insolvency practitioners if the circumstances allow for this.
If having started an IVA you decide that it is no longer the right solution you can allow it to fail. You simply cancel the agreed payments and ask your IVA company to fail it. You will then be in control of how to manage your outstanding debts from that time on.
Any Other Questions? – Contact your Insolvency Practitioner
If you have any further questions about your post-IVA life or wish to discuss your debt problems, here at Become Debt Free, we are happy to answer any questions you may have and have our own licensed insolvency practitioner who is licensed by the Insolvency Practitioners Association to enable us to propose new IVAs directly without having to pass your details to other third party companies.