An IVA, or Individual Voluntary Arrangement, is a legally binding agreement between an individual and their creditors to pay off debts over a set period of time. Here are some advantages and disadvantages of an IVA:
Search Online for the Pros and Cons of an IVA
I thought I would spend a little time searching online and in books, for the advantages and disadvantages of an IVA’s and these are the main results that came up. Of course I had to add some of my own comments, this way you may be able to make a more informed decision as the whether or not an IVA is right for you.
Advantages of an IVA
Avoiding the publicity that comes with a bankruptcy.
Not strictly true as there is an online register, where you can do a name search.
Affordable payments: An IVA allows you to make affordable payments based on your income and expenses, which can help you manage your debt and avoid bankruptcy.
Freeze interest and charges: Once your IVA is in place, your creditors will typically freeze interest and charges on your debts, which can help you pay off your debts faster.
Legal protection: Your IVA is a legally binding agreement, which means your creditors cannot take further legal action against you for the duration of the IVA (as long as you make your payments).
They fail to mention what the IVA company can do to you, if the IVA fails. See this post What Happens if my IVA Fails?
Debt write-off: If you successfully complete your IVA, any remaining debt is typically written off, meaning you no longer owe that debt.
Simplified debt management: With an IVA, you only need to make one payment each month, which is then distributed to your creditors by a licensed insolvency practitioner. This can simplify your debt management and reduce stress.
I get the feeling they were scraping the bottom of the barrel with this advantage?
Avoid bankruptcy: An IVA is a viable alternative to bankruptcy, which can have serious long-term consequences for your credit rating and future financial prospect
Is bankruptcy really such a bad thing? It is also worth noting that a bankruptcy usually lasts 1 year, where as an IVA lasts 5 years and sometimes extended to 6 years.
It’s important to note that an IVA may not be the best solution for everyone, and you should speak with a financial advisor or debt expert before making any decisions about managing your debts.
I do sometimes wonder where you will actually get the best advice. You might think a good accountant or solicitor, but this is not the case as very few understand insolvency.
Disadvantages of an IVA
Here are some potential disadvantages of an IVA that I found whilst trawling the net.
Negative impact on credit score: An IVA will be recorded on your credit report for six years, which can negatively impact your credit score and make it more difficult to obtain credit in the future.
I think if you are at the stage of considering an IVA, your credit score will already be well and truly shot.
Public record: Your IVA will be listed on the Individual Insolvency Register, which is a public record that can be accessed by anyone.
Yep, that is true as I stated at the top of this post. I just don’t understand why if they are regulated, they can get away with giving misinformation like above?
Risk of failure: If you miss payments or otherwise breach the terms of your IVA, it may fail, which could result in legal action from your creditors.
Limited flexibility: Once your IVA is in place, it can be difficult to make changes to the agreement, which can limit your flexibility and ability to adapt to changing circumstances.
Mmmmm, they seem to have forgotten to mention that the company administering your IVA can also take legal action against you! What Happens if my IVA Fails? You may also want to see the chart on IVA failures/termination. I wonder if they use the word “termination” so that it doesn’t sound so bad?
Upfront fees: There may be upfront fees associated with setting up an IVA, which can add to the overall cost of the agreement.
Oh, you can be sure there will be some hefty upfront fees, and ongoing fees?
Restricted borrowing: While you’re in an IVA, you’ll typically be restricted from borrowing money without permission from your insolvency practitioner, which can limit your financial freedom.
It’s important to consider both the advantages and disadvantages of an IVA before deciding whether it’s the right solution for your debt problems. It’s also recommended that you speak with a qualified debt advisor or insolvency practitioner to discuss your options and make an informed decision.
Of course they will say that, but finding that good advice can take time, especially when you are under extreme creditor pressure. You may find this post useful: Two Step Debt Solution as it will give you more time to investigate the best debt solution for you
In most cases, your property is not at risk in an IVA, but there are some important considerations to keep in mind.
If you are a property owner, you need to be 100% sure that your property is safe! Read the IVA contract, as it should tell you what will happen to your property! Do not take their word that all will be fine, as maybe a few years into your IVA there is a shock in store for you. What happens to you and your property if the IVA fails?
If you own a property and have equity in it, you may be required to release some of that equity to help repay your debts. This means that you may be required to remortgage your property or sell it and downsize to a more affordable home in order to release the equity.
Do you want to take that risk? Not all IVA sites will make you aware of this………..
However, it’s important to note that your home is not automatically at risk in an IVA. If you are up to date with your mortgage payments and have little or no equity in your property, it is unlikely that you will be required to release any equity.
…… and a few years into your IVA you may have a lot of equity, so what happens then…………….
It’s also worth noting that an IVA can be a useful tool for protecting your home if you are struggling with unsecured debts but want to avoid bankruptcy. By entering into an IVA, you may be able to avoid having to sell your home to repay your debts, as long as you can keep up with your mortgage payments.
I wonder how protected your home is in an IVA?
Ultimately, whether your property is at risk in an IVA will depend on your individual circumstances. It’s recommended that you speak with a qualified debt advisor or insolvency practitioner to discuss your options and determine the best course of action for your situation.
These are just some of the things that cam up when I searched for the pros and cons of an IVA.Don’t be sucked in by all the smiling faces and slogans that promise to get X thousands of pounds of debt written off. These debt help companies are there to make money, and a lot of money they make too. I would suggest that you also read what The Bankruptcy Association says about debt and profits.
There are far too many companies out there, that are not telling you that there is a RISK to your home in an IVA!