Individual Voluntary Arrangement (IVA) Warning!
On a certain advert there is the following warning:
“An IVA should only be considered in extreme circumstances. It is a formal agreement supervised by and insolvency practitioner. Failure to adhere to an IVA could result in bankruptcy. Your credit rating will be affected. IVA’s are not available in Scotland . Fees are payable in an IVA.”
I saw an advert on TV the other day and in part of it they said the following: “Now we only pay back what we can afford, and thanks to an IVA we know that our home is safe.”
Is Your Home Safe in an IVA?
Lets have a look at the advantages and disadvantages of an IVA, that can be found in various places:
Advantages of and Individual Voluntary Arrangement (IVA)
- The Debtor avoids the stigma that is associated with a bankruptcy
- An IVA can be drawn up according to the client,s situation, so that assets are not lost if the creditors agree
- Creditors could receive higher payments than they would if the Debtor were to be made bankrupt
- Any unsecured creditors who voted against the IVA are bound by it
- The debtor is not subject to the same restrictions that are imposed by a bankruptcy, therefore they can still be a company director without the need for permission from the courts, they may also find it easier to obtain credit for the business.
- The debtor could be in a profession where they could lose their job if they were to be made bankrupt
- An IVA at a set time period and does not involve an in-depth investigation
Disadvantages of and Individual Voluntary Arrangement (IVA)
- The debtor add to have more than two unsecured creditors and unsecured debts of at least £10,000 as a viable IVA option
- IVA costs are relatively high and in some cases may have to be paid in advance
- Assets are at risk if the creditors do not agree to have them excluded
- If an IVA fails the Debtor may still be made bankrupt and the cost of the failed IVA could also be added to the debts
- The Debtor is closely monitored for the duration of the IVA and is obliged to inform the supervisor of any changes to their circumstances
- Should the Debtor’s circumstances change for the worse, the IVA could fail if the creditors can’t be persuaded to accept a new arrangement
- An IVA can affect your credit rating
- The details of your IVA are held on a public register
Your Property is at Risk in an IVA
As you will see from the information above it is possible, as in note 2 and 3 of the advantages/disadvantages section ,that a property can be made safe. However in the disadvantages section, note 3 indicates that the opposite may be true. You now have to ask yourself, at what point do you sign on the dotted line to enter into an IVA, I bet it is before note 2 and 3 above! Big risk strategy me thinks. It is also worth noting that in the advantages section, the creditors will get more. It is also worth noting that a bankruptcy is 12 months, whereas an IVA is usually 5 years. You do the sums………….
So if you do own a property you have to be 1,000,000% certain that your property is safe in an IVA.
Very often when someone enters into an IVA the company dealing with the IVA places a restriction/charge over the property with land registry. So how safe does your house look now?
I have also known cases where an IVA has failed, then the company dealing with the IVA has then decided to make their own client bankrupt! Once they made their client bankrupt they then requested that they administer the bankruptcy, because they were familiar with the case. Or maybe more to the point they knew that there was value in the property and therefore they would be able to make more money from their client!
Individual Insolvency Register
Like bankruptcy, if you enter into an IVA your information will be held on a register that is viewable by the public. Here is a sample page for “Smith” from the register:
All I am saying is, think very hard and get as much information as possible, if you are thinking of going into an IVA.
Every Debt Solution can be dangerous, just some are more dangerous than others.