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Pros and Cons of an IVA
To help you make the best, most-informed decision regarding whether an Individual Voluntary Arrangement (IVA) is the right option for you, we have compiled a list of some of the biggest pros and cons. As an independent advisor, our only aim is to ensure you enter a debt repayment plan that helps you become free of debt as quickly as possible. To do this, our team of financial experts are on-hand to answer any questions you may have and to provide you with as much information as possible. The following list of IVA pros and cons is designed to draw attention to some of the biggest benefits and disadvantages of an IVA.
- Affordable repayments – You will only be required to pay what you can afford. This means that your IVA advisor will examine your finances and calculate what you can afford to pay each month for the period of the IVA and make this recommendation to your creditors with the understanding that you cannot pay any more than this
- An end to your debt – An IVA will only last for a fixed time period – usually around 5 years. Once your creditors have agreed to the timeframe, they will not be able to change their mind and ask for further payments. Once the period is over, you will be free of the debt, regardless of whether you still owe money or not
- Protect your assets – An IVA protects assets such as home equity by preventing your creditors from forcing you to sell them to meet your debt
- Eliminates legal action – Because an IVA is legally binding, your creditors will no longer be able to take any further legal action against you regarding what you owe them.
- Stops your debt from increasing – Once you agree an IVA, the amount you pay is set; thereby preventing your creditors from adding interest to the amount you owe or charging you extra fees such as late payment charges and arrears
- No more stressful phone calls – Once you have entered an IVA, your creditors will no longer be able to contact you directly; instead they must communicate with you via your Insolvency Practitioner
- Protect your reputation – Unlike bankruptcy, an IVA is not made public record nor is your tax code changed; allowing you to prevent others such as employees from knowing about your financial situation
- Protect your job – Unlike bankruptcy, there are no restrictions regarding what jobs you can and cannot do; making it a much better option than bankruptcy for people who are affected by such restrictions, such as bank and government employees
Is an IVA my best option?
IVAs are the best option for many as they are legally binding with your creditors and debt is usually cleared within 5-6 years. Assets can be kept and a payment structure is made that suits your situation. However an IVA can be very strict and needs to be kept to. If it fails then there is a risk of bankruptcy. Certain professions can also be affected by insolvency, so check your contract of employment before going forward with an IVA. Whether you’re accepted onto an IVA or whether other options such as Debt Relief Orders (DRO) or Bankruptcy are better options, depends on certain criteria. Complete our quick online assessment to see which is best for you.Take our quick online test
- Credit rating – An IVA will have a significant impact on your credit rating for 6 years or more; making it virtually impossible for you to be approved for credit during this time
- Windfall clause – As part of the IVA agreement, you must declare any financial gift/windfall you receive and are expected to contribute this to your creditors
- Annual reviews – Your financial status will be reviewed every year, with you legally bound to increase your payments if you can afford to
- Banking restrictions – During the IVA you will only be allowed a basic bank account – preventing you from having an account with an overdraft, as well as a credit card or cheque book
- No cancellation – Because an IVA is a legal agreement between you and your creditors, you cannot simply stop paying. If you request to terminate your IVA you could be made bankrupt as a result
- Budget restrictions – You are expected to manage your finances very carefully; therefore, you will only be given a modest living allowance during the duration of the IVA