IVAs - The Good and the Bad Points
An Individual Voluntary Arrangement (IVA) is a legal and government approved method of resolving debt. If you are struggling to make your current debt repayments then taking out an IVA is a legally binding commitment between yourself and your creditors that you will repay a proportion back over a certain time period. If you are considering an IVA then read on to find out whether it's the right debt solution for you.
Advantages of an IVA:
- Once you have completed your IVA term your debts are wiped clear.
- In most cases an IVA will protect your home from being liquidated.
- Up to 75% of your debt can be written off if you take out an IVA.
- You only have to pay back what you can afford after your household expenses are taking into account.
- Your creditors can no longer harass you for money or take further legal action. All transactions and the management of payments is done through the County Court.
- You can continue to have a bank account.
- If you own a business you can continue to trade, even if you have taken out an IVA.
- Creditors benefit with higher rates of returns compared to other debt management solutions.
- An IVA can help repair your credit history and get you back on track to financial freedom.
- Compared to other debt solutions, an IVA is more flexible, allowing you to have a say in which of your assets can be made available to your creditors.
Disadvantages of an IVA:
- An IVA will show up on your credit report for up to 6 years. This will make obtaining credit, phone contracts and other forms of lending quite difficult.
- Generally speaking an IVA can last up to 5 years, whereas Bankruptcy is just 1 year.
- In some cases, an IVA insolvency practitioner may request some of the equity in your home to be released as part of the deal with your creditors.
- An IVA is recorded in the Individual Insolvency Register which can be searched by any member of the public.
- If you take out an IVA you can no longer gain access to credit during the term.
- If you fail to make payments then you will automatically be made bankrupt.
- You must have more than 3 creditors and at least £15,000 debt in order to be eligible for an IVA.
Related Articles:
- Who Should Consider an IVA
- Alternatives to Bankruptcy
- Bankruptcy or an IVA?
- IVA Benefits and Drawbacks
- Brief Bankruptcy Guide
Site is for information only and does not constitute financial advice. E&OE.
