IVA - Advantages and disadvantages

Advantages of an IVA

It only requires 75% (by debt value) of your creditors to agree to it for it to be legally binding on all and to stop all creditors from pestering you.

Unlike a debt management plan, once an IVA is accepted by creditors it freezes any further interest being added to your debts.

Removes the worry, stress and anxiety for you.

Avoids the nightmares of debt collectors, bailiffs and other legal actions creditors will take if you continue to miss payments. You will never have to deal with the creditors yourself again.

You only pay for a limited time usually 5 years unlike a debt management plan which could go on for a very long time.

Once successfully completed, you will be debt-free even though you will not have paid off all your debts in full.

It allows you to make just one payment a month or in some cases a single payment, rather than a multitude to several different lenders.

Unlike bankruptcy you will be able to keep your home. However creditors can have any spare equity in the property.  

Once agreed monthly payment will remain fixed unless your income level increase substantially.

It overturns any previous county court Judgments.

Unlike Bankruptcies your agreement will be kept private. There is no publicity in the local papers, and your employers don’t get to know about it. However it will be recorded on and affect your credit rating.

You can continue to practise as a professional person (i.e. accountant, solicitor, doctor etc) or as a director of a company and can hold public office, as an IVA does not affect your professional status.

You can open a regular bank account, without an overdraft facility which you may find difficult to do should you become bankrupt.

Partners and sole traders experiencing business problems can also use an IVA to secure their businesses survival if they are sure of its future profitability. An IVA simply means they can generate income towards repayment to creditors which would otherwise have to call upon the personal assets of the individual. It also enables the business to continue trading, something that bankruptcy would not enable.

 

Disadvantages of an IVA

Your IVA advisor is required to review your financial situation every year and as a result you may be required to increase your monthly contributions into the IVA.

If you miss any payments your creditors can and probably will file for bankruptcy. 

The minimum amount that most creditors will accept per month is between £200 - £300 per month.  If you do not have this amount, or enough equity in your home to settle your debts, individual bankruptcy may be the only option.

If your partner /spouse even have just a few joint debts with you, they may have to be included in the Individual Voluntary Arrangement IVA.

You will normally be unable to obtain any new credit whilst in an IVA.

The costs of establishing the IVA will be added to your overall debt if it fails and you fall into bankruptcy.

If you have equity in your house, an endowment policy linked to your mortgage, or valuable assets you may be required to release them in to pay your creditors. (This is usually done near the end of the arrangement). However this is preferable to repossession and enables you to safeguard and retain your home.

Unlike individual bankruptcies, IVAs will take up to 5 years to clear off your debts

Setting up an IVA

If after reading all of these points and considered all alternatives to an IVA, you still feel an IVA would be the best debt solution for you.

Click here and you will get an immediate idea of its relevance and if requested our appointed IVA experts will call you to discuss your financial solution to check that an Individual voluntary arrangement is indeed your best debt solution. This is entirely free of charge.

If they agree they will then appoint an Insolvency Practitioner to represent you and contact your creditors informing them that they have been asked to represent you legally.

Based on the information you provide, the Insolvency Practitioner will agree a realistic repayment amount with you, and an Individual Voluntary Arrangement IVA proposal will be drafted. Once drawn up this will need to be checked by you for correctness, signed and returned to them.

The Insolvency Practitioner will then apply to the court for an interim order to legally protect you from your creditors.

Once the Interim Order has been granted, you will be fully protected from creditors issuing or continuing bankruptcy proceedings.

A meeting of creditors is then held. Providing 75% (in terms of debt owed) of the creditors that have voted, vote to accept the IVA, it will be approved and will then become legally binding on all other creditors, whether they voted or not. If any of the creditors don't vote, it is assumed that they will vote FOR the IVA. If a creditor who voted against the IVA represents more than 25% of the total debt owed the IVA will fail and not meet approval.

Once accepted your creditors can never bother you again, as long as you keep to the terms of your IVA.

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More information:
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