If you’re struggling with debt, a formal debt solution, such as an IVA or a CCJ, can help you take the first step towards fixing your finances by repaying what you owe in a way that is more manageable and affordable for you.
But can you enter into an IVA if you have a CCJ and what effect will this have on your existing arrangement?
In this guide, we’ll outline everything you need to know about IVAs and CCJs including:
- What an IVA is
- What a CCJ is
- If a CCJ will appear on your credit file
- If you can get an IVA if you have a CCJ
- How an IVA will affect your CCJ
- If an IVA will remove a CCJ from your credit file
- If you can get an IVA if you have had a CCJ in the past
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What is an IVA?
An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between you and your creditors to repay a portion of your unsecured debt through a series of monthly payments.
This can include benefit overpayments, debts to family and friends, and National Insurance arrears.
Because IVAs are formal debt solutions, they can only be managed by an Insolvency Practitioner (IP) who will oversee your arrangement from start to finish to ensure it runs smoothly.
Most IVAs last a total of five years but can be extended to six years if you miss a payment or have a payment break during your arrangement.
After this time, you will be released from your IVA and declared debt-free.
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What is a CCJ?
A County Court Judgment (CCJ) is a type of court order that can be registered against you if you owe money and your creditor doesn’t believe they will receive the money owed without taking legal action.
Under the Consumer Credit Act, you must be given sufficient warning of a CCJ before action is taken.
This will usually be in the form of a letter that outlines the steps you can take to resolve the issue and explains what will happen if you do nothing.
When you receive a letter warning you of a CCJ, you have 14 days to respond and state whether you intend to pay the amount listed or challenge the order.
Failure to respond within this timeframe could lead to the court issuing a repayment schedule that you may not be able to afford or even demanding you repay the debt in full.
Will a CCJ appear on my credit file?
Just like an IVA stays on your credit file for six years, a CCJ will also appear on your credit file for six years from the date it was approved even if you repay it partially or fully within this time. This can make it difficult to get approved for further credit, such as a loan or mortgage.
Your CCJ will also be listed on a public register known as the Register of Judgments, Orders and Fines for six years. This information is publicly available and easy to access but is usually only viewed by those in the financial industries such as banks and lenders when deciding whether to approve your application for credit.
However, if you pay the full amount listed within one month of being issued with a CCJ, it will be removed from your credit file and the Register of Judgments, Orders and Fines. If this isn’t the case, you must contact the relevant credit reference agencies and ask them to update your record accordingly.
Can I get an IVA if I have a CCJ?
If you have received a CCJ, you may be wondering if you can enter into an IVA and the answer is yes.
In most cases, a CCJ debt can also be included in your IVA debts which means you don’t need to worry about making another monthly payment towards your CCJ and can only focus on paying your IVA.
By getting an IVA whilst you have a CCJ, it can prove that you are treating all of your creditors equally and not prioritising one over another which could cause your IVA proposal to be rejected.
It will also show you are doing the responsible thing by dealing with your debts instead of waiting for your creditors to take further legal action against you.
When your IVA starts, payments to your CCJ will stop for a brief period to allow them to be included in your IVA.
Your creditors will then start to receive their payments from your Insolvency Practitioner in the same way as the rest of the creditors included in your IVA.
How will an IVA affect my CCJ?
When you enter into an IVA, your existing CCJ won’t be called off but it will be cancelled out by your IVA. It may also be possible to put a stop to any CCJs that are in progress when you enter into an IVA to ensure you don’t end up with a CCJ.
When your IVA has been accepted, the creditor that issued the CCJ will be prohibited from contacting you or taking further action against you to recover the debt they are owed because you are making payments through the IVA.
If you are concerned about how your IVA will affect your CCJ, you should contact a debt adviser or your IP for tailored debt advice.
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Will an IVA remove a CCJ from my credit file?
When you start your IVA, it will be listed on your credit file for six years during which time it will lower your credit rating.
However, your credit file will more than likely already include the missed payments or defaults that led to your CCJ in the first place and these debts will stay put even after you enter into an IVA.
Can I get an IVA if I have had a CCJ in the past?
If you have had a CCJ in the past, there is nothing stopping you from entering into an IVA to help you repay your unsecured debt.
However, if your CCJ is still noted on your credit file, your IVA will be listed as a separate entry on your credit report which can cause further damage to your credit score.
