IVA PROS AND CONS
What are the pros and cons for an IVA
Debt Free in 5 Years
An IVA will last for a fixed period of time, normally no longer than 5 years.
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.
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.
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.
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.
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.
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.
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.
Professional Status Unaffected
Regardless of your professional position (e.g. doctor, solicitor or accountant) you can carry out an IVA without any adverse effects to your job.
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.
Minimum Level of Debt
Usually you will only be able to undertake an IVA if your total unsecured debt is more than £10,000. In addition, you will usually need to be able to afford a monthly payment of at least £120.
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. However you will be able to use prepaid cards.
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.
Damaged Credit Rating
Your credit rating will not be as badly damaged as if you went bankrupt but you will still be unable to borrow for 5 years. You will also have a period after your IVA where it may be hard to get credit. This period varies but should be less than a year.
Longer than Bankruptcy
An IVA will 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.
You will pay back more than you will in bankruptcy
In an IVA you will pay back about a significant amount of your debt (e.g. 20%-50%) as opposed to bankruptcy where you will pay back a minimum amount (which could be as little as 0).
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).
If you use the IVA Calculator we will pass your details on to one of our partners who will contact you and explain all the options available to you. They will then be able to help you set up a debt solution which is right for you.
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 affect credit ratings which record all financial activity for 6 years.
The debt solutions offered by our partners depend on your criteria and circumstances; including how much you owe and how many creditors you owe money to. You need to speak to a debt advisor to obtain a full assessment.