Debt Blog

Pros and Cons of an IVA

In this post I write about IVA Pros and Cons. An IVA or Individual Voluntary Arrangement is one debt solution that could be used to sort out your debt problems.

An IVA is a formal solution meaning that once it is set up, creditors are unable to take any further action so long as you maintain your payments.

The Pros of an IVA

1. An IVA runs for a set amount of time. Usually for 5 years but it could be a little longer than this.

2. Creditors will stop contacting you once the IVA has been agreed. You will no longer receive letters or telephone calls chasing payment.

3. No further action can be taken against you, providing that you stick to the IVA and maintain the arrangement.

4. It is a private agreement. This means that your name will not be printed in the local news paper. However your name can still be searched for on the Insolvency Register.

5. Your professional status will be unaffected, for example if you are a doctor, solicitor or accountant. You can carry out an IVA without any adverse effects to your job.

6. An IVA is a fixed legally binding agreement on all the creditors included in the IVA. You will know exactly where you stand and how long you will be in debt for.

7. You only make one single payment towards your IVA agreement.

8. Interest and Late payment charges are frozen. No further interest or charges can be added.

The Cons of an IVA

1. You need to be in at least £15,000 of debt. This debt also has to be unsecured debt.

2. It lasts longer than Bankruptcy. An IVA runs for at least 5 years. Bankruptcy normally lasts for 1 year or 3 years if you have a payment order.

3. You must include all of your creditors in the IVA.

4. Damaged Credit Rating. Your credit rating will be adversely affected. The same as if you were to be declared bankrupt.

5. You must maintain your payments for the period the IVA runs. Failure to maintain your IVA payments could lead to Bankruptcy. It could be possible to miss payments in extreme circumstances but this varies.

6. You cannot borrow any money during the IVA. This means you cannot use any credit or store cards. You may still be able to change your mortgage or take a new one whilst in an IVA.

7. You will pay more money back to your creditors than you would if you was declared bankrupt. In an IVA you will pay a significant percentage of your debt whereas in Bankruptcy you could pay as little as 0 depending on your circumstances.

8. You may be required to release equity in your home or other valuable assets.

An IVA can help you to get back on top of your debts. Again it is something that you need to give a lot of thought to. There may be other debt solutions that are more suitable and it would be worth discussing these with a qualified professional.

You can find further information on the helpful links section of this blog. Alternatively if you would like to read about other debt solutions please see my post on getting out of debt.

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