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IVA Pros and Cons IVA Advantages and Disadvantages

IVA PROs / IVA Advantages

  1. Debt Free in 5 Years

    An IVA will last for a fixed period of time, normally no longer than 5 years.

  2. Telephone Calls and Payment Demands Stopped

    Once the IVA is agreed, your creditors by law are no longer allowed to demand payments from you either by telephone or letter.

  3. Interest and Late Payment Charges Frozen

    After the IVA has been put in place, your creditors cannot add further charges or interest to any of your accounts covered by the agreement by law.

  4. Single Monthly Payment

    At the beginning of the arrangement, you agree with your creditors what you can afford to pay each month. In some cases, you can pay a one-off lump sum.

  5. Protection for your home

    Homeowners would not be forced to sell their home during an IVA process, but may have to release some money through a remortgage towards the end of the IVA, if that is possible.

  6. Protection for certain assets

    It is possible to keep certain assets in an IVA such as a car that is needed for commuting to work. It is also possible to negotiate with creditors to keep other assets if extra IVA payments are made, but it would be up to creditors to agree to this.

  7. Repaired Credit Rating

    Once you have successfully completed your arrangement, you will be allowed to borrow money and your credit rating will start to improve. You will not be credit blacklisted for life.

  8. Payback

    Many people are keen to avoid bankruptcy and pay back us much as they can reasonably afford on what they have borrowed. In a bankruptcy creditors would in many cases see little or no payback at all, but an IVA will allow a better return for creditors and show that the debtor has paid back as much as they could.

  9. Fixed, Legally Binding Agreement

    Once agreed, the IVA is legally binding (see glossary) on all the creditors. You will know exactly where you stand and exactly how long it will be before you are debt free.

  10. Flexible

    Even though the IVA is a fixed agreement, a lot can change in 5 years. The IVA allows variations when situations change, provided these can be proved and agreed with creditors.

  11. Protection from Court Action

    Once an IVA is in place, your creditors are not allowed to take further legal action against you as long as you stick to the terms of the arrangement.

  12. A Private Agreement

    If you undertake an IVA, it is a private matter between yourself and your creditors. No publicity in the local papers. However your name can be searched in the insolvency register which is available on the internet. See: https://www.gov.uk/search-bankruptcy-insolvency-register

  13. Professional Status

    Some jobs do not allow the employee to become bankrupt; whereas an IVA can be acceptable. Debtors cannot be company directors whilst bankrupt, so the IVA can be preferable for them. It is important to check the terms and conditions of employment to be sure of this.

IVA CONs / IVA Disadvantages

  1. Possible Release of Home Equity

    If you have any equity in your property or any other significant valuable assets, you may be required to release some or all of this as part of the IVA agreement. However, sometimes the creditors agree to an extra year of IVA payments if an equity release from your property is not possible, making the IVA 6 years in total instead of 5.

  2. Minimum Level of Debt

    Usually you will only be able to undertake an IVA if your total unsecured debt is more than £6,000. In addition, you will usually need to be able to afford a monthly payment of at least £80.

  3. No Unsecured Borrowing During the Arrangement

    While you are in an IVA, you will not be able to use your store or credit cards. These must be cut up. However, it may be possible to change an existing mortgage or take a new one while you are in an IVA. In addition, you may be approved to borrow up to £500 if this is agreed with the insolvency practitioner. You will be able to use prepaid cards.

  4. Stick to a regimented regime for 5 years

    Failure to maintain control of your finances and keep up your IVA payments will mean that you may be bankrupted. However you may be able to take payment holidays and you may be able to miss payments for extreme circumstances, but this will extend the period of you IVA.

  5. Damaged Credit Rating

    Your credit rating will be effected and you will be unable to borrow for the duration of the IVA. You will also have a period after your IVA where it may be hard to get credit. This period varies but a credit rating can be repaired over time.

  6. Longer than Bankruptcy

    An IVA will usually last for 5 years compared to bankruptcy which will usually only last 1 year unless you have a payment order and this will last three years.

  7. You will pay back more than you will in bankruptcy

    In an IVA you will pay back as much as you can afford over the 5 years (e.g. 20%-50%) as opposed to bankruptcy where you will pay back a minimum amount (which could be as little as 0%).

  8. You must include all creditors

    All creditors must be included and you cannot make separate arrangements with each one (which can be done in a DMP).

  9. Professional Status

    Some jobs do not allow the employee to become bankrupt or be in an IVA. It is important to check the terms and conditions of employment to be sure of this.

  10. Insolvency register

    IVA is a form of insolvency as is bankruptcy, so your name can be searched in the insolvency register which is available on the internet. However, someone would have to have a reason to do this; the information is not advertised in any way. See: https://www.gov.uk/search-bankruptcy-insolvency-register

The above is provided as information only. Iva.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts.

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Important Information

IVA.co.uk does not provide debt advice. You must always seek professional advice before taking any action to resolve your debts. If you use the IVA Calculator or call the IVA Helpline, we will pass on your details or connect you to one of our partners who will contact you and explain all the options available to you. With your permission they can connect you with authorised debt solution providers who can process an application for you

IVA.co.uk does not charge you any fees for use of our forum or the IVA Calculator, however we do get paid by our sponsors and the partners we work with. Our partners charge fees and those vary depending on the partner and the debt solution. Customers should refer to our partners' websites for more information regarding their services.

Before entering into any debt solution you should ensure that you have considered the implications. Failure to keep up with repayments can result in bankruptcy or legal action. Lenders are not obliged to accept less in settlement of a debt than they are entitled to or to freeze interest or charges. Not all solutions involve debt write off and some solutions may result in the total amount payable increasing, or the period over which it is to be repaid increasing. Debt solutions will affect your credit rating which records all financial activity for 6 years. Your assets and property could be at risk in some solutions. Conditions apply and each application will be subject to acceptance and eligibility.

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