IVA Pros and ConsTo get a general idea of how an IVA works and what it might mean for your lifestyle, it is useful to read the advantages and disadvantages associated with being in an IVA. So we can help you decide if an IVA is right for you, we’ve outlined the main IVA pros and cons below.
What is an IVA?
An Individual Voluntary Arrangement (IVA) is an agreement with the people you owe money to. You make affordable payments over a period of time (usually 5-6 years) and at the end, your remaining debts are written off.
What is a Debt Management Plan?
A debt management plan (DMP) allows you to pay back your creditors each month at an amount you can afford. The DMP lasts until you have repaid your debts in full or your circumstances improve.
What is a Self-employed IVA?
A self-employed Individual Voluntary Arrangement (IVA) is an agreement to pay back what you owe whilst still running your business. You make affordable payments over a period of time (usually 5-6 years) and at the end, your remaining debts are written off.
What is a Debt Relief Order?
A debt relief order is a solution available if you are not able to afford any payments to people you owe to. It freezes debts for a year at which time they are written off if your circumstances have not improved.
What is Bankruptcy?
Bankruptcy is a type of insolvency that involves applying to the court in order to clear your debts. There is an upfront fee and you may be required to make payments from your earnings into the bankruptcy for up to 3 years.
The benefits of an IVA can be quite compelling, especially if you have problems with debt:
- You only have to pay an agreed percentage of your debt back. You will still be paying part of your debt back with an IVA which will be a higher amount than creditors are likely receive in bankruptcy.
- You will be free of debt in a set time. In an agreed number of years you will be debt free and able to get on with your life.
- Your creditors will stop calling. Once enough of your creditors agree to it – at least 75% in value of the creditors that vote must do so – an IVA is legally binding. That means they cannot take any further legal action or contact you to demand payment.
- You won’t have to sell your home. However, you could be expected to re-mortgage and free up some equity for your unsecured creditors – our advisers can explain this in more detail.
- It’s affordable. Your monthly IVA repayments will depend on your specific income and outgoings, meaning it will be an amount you can afford each month.
- The contractual interest and charges on your unsecured debt will be frozen, so you can get on with making payments.
- There is always someone on your side. You will receive support from us throughout the process, meaning you always have someone to discuss any concerns with.
If you’re considering an IVA then it’s important you take everything into consideration, including the small print.
- A high proportion of all IVAs we put through are accepted however your creditors do have to agree to an IVA, therefore we can’t guarantee it.
- An IVA is a formal arrangement so you do need to comply with the terms for it to work. The monthly payments will be affordable and sustainable, but are likely to mean quite a tight budget while the debt is repaid.
- It will affect your credit score. IVAs remain on your credit file for six years from the date your creditors agree to it or until your IVA is finished, if it lasts longer than six years, meaning that even if you complete it within five years, it will show up on your record for another 12 months.
- Your IVA will be listed on the Individual Insolvency Service register.
- You will pay fees to the IVA company, although they will often be factored into your affordable monthly payments.
Where can I get more information on an IVA?
To see if an IVA could be the right path for you, call 0800 280 2816 between 8am and 8pm Monday to Friday, or 9am to 3pm on Saturday.
You can also email us: firstname.lastname@example.org
*In the case of a one-off lump sum settlement