If you owe your creditors a lot of money and have failed to stick to repayment arrangements, especially if they have been laid out by a judge because a creditor has taken you to court, then the judge may make an attachment of earnings order.

An attachment of earnings means that the amount of money you have to pay your creditor each month is deducted at source. When an order is made on your earnings then your employer will know about it because they have to deduct the amount at source. If your job could be affected by your employer’s knowledge of your debt then you may have to pay the amount into the court every month. When an attachment of earnings order is made against you and you change your job then you have to inform the court; not to do this is a criminal offence.

If you have more than fifteen thousand pounds worth of debt consolidation loans then you may apply for an IVA or an individual voluntary agreement. You meet with an insolvency practitioner who will draw up a plan to present to your creditors. If your creditors agree to the terms of the individual agreement then the practitioner will pay the creditors the money that you give them every month.

When a person already has an attachment of earnings order and is then signed up to an individual voluntary agreement, and then the IVA takes precedence over the attachment of earnings order. Creditors who already being paid through an attachment of earnings may not want to agree to an IVA but providing three quarters of your creditors do, then the attachment of earnings order is overridden by the IVA.

When the attachment of earnings order is dissolved then the debtor’s income is increased by that amount and this will affect how much they have to pay on their voluntary agreement. Generally speaking creditors can expect the debtor to pay the whole of that amount as part of the IVA; however, this does not mean that one creditor will receive more than the rest because the payments on an IVA have to be equally divided.

If you already have an attachment of earnings order against you but have more than one creditor then you may find that you benefit from an individual voluntary agreement. Unlike an attachment of earnings that continues until the debt is paid in full, an IVA only lasts for five years. At the end of the five year period of an individual agreement, any remaining debt is written off and you will be legally debt free. An IVA, however, will affect your credit record for six years, the same period as a bankruptcy.

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