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Tackling your debts

How can an IVA help if I’ve got a CCJ?

Posted 05 February 2016 by Christine Walsh

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Do you know how to deal with a CCJ? It’s possible that a debt solution, like an IVA, could help, so make sure you know how they work.

It’s never too late to start putting a plan together to deal with your problem debts – even if you’ve been issued with a CCJ. There are debt solutions available that could really help you get a handle on your finances and stop any legal action that your lenders have started, or told you that they are going to start. 

In this blog, we’re going to look at what a CCJ is and the consequences of getting one. We’re also going to take a look at one debt solution – Individual Voluntary Arrangements (IVA) – and break down exactly how it might help if you’ve got a CCJ. 

 

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What’s a CCJ and how should I deal with one?

CCJ stands for Country Court Judgment and is a court order that can be issued by a court in England, Wales or Northern Ireland. So if you receive one, it means that your lender, after trying to contact you about the amount that you owe, has taken the matter to court. If a judgment is granted, the court has agreed that you owe the money and made a decision on how and when you should pay it back. 

Ignoring a CCJ will only ever make the situation worse. The consequences of simply leaving it can include:

• visits from bailiffs

• extra court and bailiff costs being added onto your existing debt

• the lender being able to apply for money to be taken from your wages, called an attachment of earnings  

• the lender being able to apply for the debt to be secured against you home, called a charging order 

It’s important to remember that even if you’re struggling to keep up with the agreed repayments on a debt, it does not have to get to the stage where you’re being issued with a CCJ. You should always try and keep your lenders informed if there’s a problem making the payment, so that they know you’re not simply trying to avoid paying it back. When you speak to your lenders it can help if you’ve already sought professional debt advice and received a recommendation for how to deal with your debt. This way, when you next speak to your lenders, you can tell them that you’re looking into a debt solution and you have every intention of paying the money back as best you can. 

So, that’s some advice for when you’ve not yet received a CCJ, and you’re afraid that you will. But what if you’ve already got one? 

What’s an IVA and how could it help?

An Individual Voluntary Arrangement is a formal, legally binding debt solution that allows you to pay something back towards your unsecured debts, while taking into account that you can’t pay everything back within a reasonable amount of time. 

So, you pay a certain amount into the IVA every month, and that amount would be distributed by your Insolvency Practitioner (your IP oversees the arrangement) to the unsecured lenders included in the IVA. The amount paid into an IVA is different for everyone – no two IVAs are the same – and is calculated to make sure you have enough money for all your everyday expenses and priority bills . 

An IVA typically lasts for five years and, after this time, as long as none of the terms of the agreement have been broken, whatever is still owing on the debts included in your IVA would be wiped clean, giving you the chance to start building your credit rating again debt free. While you’re on the IVA any interest and charges would still technically build up, but would then be written off when the IVA is successfully completed. It is possible to include existing CCJ debts in an IVA as long as the lender hasn’t obtained a charge against property as well. A charge against property means that the debt would become secured against your property and therefore could not be included on an IVA. 

Whether or not an IVA is approved really depends on the IP working with both you and your lenders to make sure that the proposal they put together is fair to all involved. The lenders get a chance to look over the proposal and vote either for or against it – if 75% of voting lenders (in terms of the value of your debt) vote yes, then it can go ahead. 

So if your lenders can see that you’re making every effort to pay as much back as possible, and they agree to the IVA, then this will stop them taking any further legal action against you. You’ll be protected from lenders sending bailiffs round, trying to take money from your wages or even issuing you with a CCJ to begin with. 

The rules on what you can and can’t do while you’re on an IVA can be strict, but this is for good reason. An IVA is a legally binding agreement and if you were to jeopardise your IVA by breaking the terms it could be revoked. This means that the lenders can then proceed with legal action against you and any interest and charges would be backdated and added back onto your debt. 

Get the right advice

Going on an IVA would have a detrimental effect on your credit rating and would remain there for six years from the date that you started the plan. This may mean that you find it harder to borrow money in the future, or that you have to borrow at a more expensive rate. Of course if you’re considering an IVA and you already have a CJJ then there will definitely already be damage to your credit rating and going on the IVA might be the best thing for your finances in the long run all things considered. 

As you can see, if you are eligible for this solution and it fits your circumstances, it can provide lots of benefits and the fresh financial start you may need. Having said this, IVAs are not the only debt solution available and there may be another one that’s better suited to your needs. Make sure you look into the other debt solutions out there and seek professional advice from one of our advisors using the options to the left, so you can be sure of the right route out of debt for you. 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.