Understanding IVA Risks: The Mis-Selling of Individual Voluntary Arrangements (IVAs)

What is an Individual Voluntary Arrangements (IVAs)

An Individual Voluntary Arrangement (IVA) is a formal contract between you and your creditors to help manage large debts. It lets you pay back part of what you owe over five to six years. After this time, any remaining debt is written off. An insolvency practitioner handles the IVA, working out the repayment plan with your creditors and making sure your payments are distributed accordingly. An IVA can help you take control of your finances and avoid bankruptcy, but it also has its own set of limitations and fees.

Why is Johnny Debt so against IVAs?

Johnny Debt isn’t against all IVAs, but he believes they aren’t always the best solution for everyone in debt. He argues that people in debt are often pushed into IVAs by companies that are more profit-motivated than genuinely concerned about their clients’ best interests. It’s important for individuals to get proper advice and consider all possible solutions before committing to an IVA, as there could be better ways to manage their debt effectively.

When are IVAs a More Suitable Option

IVAs can be a more suitable option in certain situations:

• Protecting Assets: Unlike bankruptcy, an IVA allows you to keep your property (like your house) as long as you can maintain your monthly payments. This can be crucial if your home has equity and you plan to use it for future financial security. It is a little more complex than that, just make sure you do your research first!
• Employment Restrictions: Certain professions, such as accountants or solicitors, have stricter rules regarding bankruptcy. An IVA can be a viable alternative that allows you to manage your debt without jeopardising your career. You would though need to read your employment contract.
• Debt Amount: While there’s no minimum debt amount for an IVA, they are generally recommended for larger debts (typically exceeding £10,000) where monthly payments become manageable compared to the total amount owed. For smaller debts, other debt solutions might be more cost-effective.
• Control Over Finances: An IVA offers a structured way to repay debt and regain control over your finances. You make regular monthly payments instead of dealing with multiple creditors.

What Can Happen If My IVA Fails?

An IVA is a formal contract that lasts for five or six years, and while there is a little wriggle room on repayment terms, it’s important to understand what can happen if your IVA fails or if your IVA is terminated. If you can’t keep up with the agreed payments, your creditors and Insolvency Practitioner might take further action against you, such as pursuing bankruptcy. It’s crucial to be aware of the potential consequences, so make sure to read this post on what can happen if an IVA fails.

IVA Mis-selling Problem

The mis-selling of IVAs has become a significant problem. Companies administering IVAs find them very profitable, which unfortunately can lead to pushing people into these agreements without fully explaining the risks or exploring other options. This profit motive often results in people being advised to enter IVAs when it might not be the best solution for their situation. As a result, there’s been a rise in companies specialising in mis-sold IVA claims, helping those who were wrongly advised to seek compensation.

Additionally, debt help charities and companies have faced fines and court actions for their role in mis-selling IVAs. These organisations, which people trust to provide honest and helpful advice, have sometimes prioritised their financial gain over the needs of those seeking help. It’s crucial for anyone considering an IVA to be fully aware of their options and ensure they receive transparent, unbiased advice to avoid falling into this trap.

Consider a Two Step Debt Solution

Creditor pressure can make you want to accept the first solution offered to you, but maybe a better option is to consider a Two Step Debt Solution. This approach gives you time to research and fully investigate all available debt solutions before making a decision. By taking things step-by-step, you can ensure that you choose the best option for your financial situation, rather than rushing into an agreement that might not be right for you. Taking this extra time can help you make a more informed and beneficial choice.

Free Debt Information

When seeking free debt information, it’s wise not to rely solely on sources like Johnny Debt. While we are able to offer valuable insights, it’s essential to cast a wide net in your search. Every individual’s debt situation is unique, so finding the right debt solution requires thorough exploration. Consider consulting various reputable sources, including debt advice charities, government websites, CAB and financial experts. By gathering information from diverse sources, you can make a more informed decision and find the debt solution that best suits your specific circumstances.