The Advantages and Disadvantages of an IVA

An IVA (Individual Voluntary Arrangement) is a legally binding contract between you and your creditors, supervised by a licensed insolvency practitioner. Its objective is to allow you to reach an agreement with your creditors which involves the reduction of monthly repayments; the end of any further interest charges; the ceasing of any legal action; and most importantly, a way to avoid the consequences of bankruptcy. What are the advantages and disadvantages of an IVA?

The Advantages of an IVA

  1. The contract between you and your creditor stipulates that you will pay a single monthly payment which is tailored to your financial capabilities. You will therefore avoid the stress associated with having to pay many creditors on a monthly basis.
  2. IVA's have fixed time periods such that you are guaranteed to be out of debt in a matter of a few years. The general rule is that an IVA ends after three to five years.
  3. After you have agreed the terms of the IVA, you will no longer be regularly contacted by your creditors, whether by telephone, email or letter. They are bound by legal constraints and cannot pursue you anymore.
  4. Somewhat related to the third advantage is that an IVA is a legally binding contract which all creditors have to oblige. You will be made fully aware of your position during payments, and will know when exactly the IVA will terminate.
  5. An IVA is a private contract between you and your creditors. This means that there will be no publicity of your debt, and therefore it will have no implications towards your job status or social activities.
  6. Once an IVA has been arranged, your creditors no longer have any further legal power over you as long as you follow the conditions of the contract.

The Disadvantages of an IVA

  1. In order to qualify for an IVA, you must have a minimum amount of debt of £15,000. Furthermore, you will likely face monthly repayments of more than £200 and must be in a position to be able to afford such payments.
  2. An IVA could have implications to any future credit you apply for. This is because all IVA’s are recorded in such a way that they will be included in your credit file.
  3. During the period of an IVA you are restricted by rules that state you are not allowed to use any store or credit cards.
  4. You may still have to give up any assets you hold, or equity within your household, depending on whether your creditors decide to include them when designing the IVA contract.
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