An attachment of earnings means money is being taken direct from your wages to pay one or more of your creditors. Starting an IVA will stop these deductions.

Included in this article:

• Is an attachment of earnings stopped by an IVA?
• Can an Attachment Order be issued after an IVA starts?
• What about creditors not included in the Arrangement?

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Is an attachment of earnings stopped by an IVA?

An attachment of earnings is a legal debt collection process which can be used by your creditors to recover their debt. If they successful, your employer will have to deduct a payment from your wages before you receive your pay.  

There is nothing you can do to stop this and the payment goes directly to your creditor to pay off their specific debt. This leads to more problems if you cannot afford the payment, because it doesn’t take into account other debts you may have.

However an IVA is a powerful legal agreement. Most proceedings that your creditors have already taken against you including an attachment of earnings will be overturned when you start one. In an IVA all your creditors are addressed so that you can afford your normal living expenses.

An IVA is designed to stop you getting into further debt and pay what you can to your creditors. The only payment to your debts should be done through your IVA.

Can an Attachment Order be issued after an IVA starts?

One of the key advantages of an IVA is the protection it offers you, the debtor. When you agree to your IVA you are bound by its terms and conditions, but so are your creditors.

By law, the creditors in your IVA cannot take any legal action against you. As such an Attachment of Earnings is not an option for them. All previous action and any current applications would have to stop. Your Insolvency Practitioner (IP) would ensure this is done for you.

Of course this protection only lasts as long as you maintain your payments and adhere to the terms and conditions of your Agreement. If you break your terms or do not keep up your payments, your IVA could fail. Your creditors are then able to resume legal action if they choose to.

You should include all your creditors in an IVA. If a creditor is left out or you take credit after your IVA starts, your creditors are not bound by the terms of the Agreement.

What about creditors not included in the Arrangement?

It is vital that when you start an IVA you include all your debts. Check your credit file to make sure you have included all your creditors. The IVA is only effective when handling all your debts, otherwise you are back where you started; robbing Peter to try to pay Paul.

This is the same for new credit taken after you start your IVA. Whilst you are able to borrow a small amount during an IVA, this should be avoided. You would then have extra monthly payments that you probably would not be able to afford.

These ‘extra creditors’ are problematic for a few reasons. Apart from putting a strain on your monthly expenses, your IVA will not protect you from them. The ‘extra creditors’ could take legal action resulting in an attachment of earnings, which could result in your IVA failing.

The creditors in your IVA will not accept you favouring other creditors outside the IVA over them. Why should they write off debt, when you are paying other creditors in full?