IVA Pros and Cons
If you are considering whether an Individual Voluntary Agreement (IVA) is the best debt solution for you, it is important to understand some of its biggest pros and cons. Dealing with a debt problem as quickly as possible requires you to enter a debt repayment plan that suits your situation and to do this, you will need as much information as possible. An Individual Voluntary Agreement (IVA) has several benefits but it also comes with some disadvantages. In this article, we will look at some IVA pros and cons to help you make the right decision.
Benefits of an IVA
1. Your debt will be written off
An IVA runs for a maximum of 5 years or 60 months and when this period is complete, your debt will be written off. During and after the duration of your IVA, your creditors will not be required to chase you for their debts. Once you have made all the monthly payments to an Insolvency Practitioner, the rest of your debt will be written off and you will not have to make further payments, unlike other debt payment plans where you must continue paying back your debts every month without an end in sight.
2. Your creditors will not chase you
An IVA is a legally binding agreement which means that once you sign up, your creditors must stop any court action against you aimed at recovering their debt or even contact you to discuss your debt. The agreement bars them from making any home visits, phones calls or sending threatening letters, emails and text messages.
3. A convenient repayment plan
An IVA is well structured so that you can be able to pay one affordable low monthly instalment to your Insolvency Practitioner who will then share this amount among all your creditors. You will not have to make multiple payments to many different creditors when you cannot even afford to pay them back. IVA payments start from as low as £80 per month. It is extremely quick and easy to set up an IVA unlike other debt solutions like debt management or bankruptcy that come with upfront costs. With an IVA, your only commitment is to pay the affordable monthly payment to the insolvency practitioner. There are no more charges.
4. You will keep your car and house
An IVA is a great option for you if you are looking to keep your car or protect your home and its belongings. Unlike other debt repayment plans that may require you to sell most of your assets, these will remain protected. They will not be liquidated and used to pay back your creditors. An IVA agreement only requires you to pay the agreed lower monthly instalment which is based on what you are able to pay. Whether you need your car for work or not, an IVA allows you to keep it although it will depend on how it is financed as well as the type of car you have.
5. Your career will not be affected
Most employers are not too concerned as to whether you are in an IVA or not or if you have been in this kind of arrangement in the past. However, it is always advisable to check with your employer as some sectors such as banking or insurance may ask you about insolvency.
An IVA gives you an opportunity to make a fresh start and have a peace of mind knowing that you no longer have to make monthly debt payments and you have a second chance to manage your own finances and rebuild your credit rating.
Disadvantages of an IVA
1. An IVA will affect your credit rating
After your IVA comes to an end, it will be displayed on your credit file for one year (12 months) which means that if your arrangement lasts for 5 years, your IVA may disappear from your credit file after 6 years. This may not be a problem for most people since their main concern is to deal with their debt problem.
2. Not everybody qualifies for an IVA
IVA follows strict criteria hence not everybody is eligible for this debt solution. In order to qualify for an IVA, you must have more than £6000 of unsecured debts that include loans, credit cards, overdrafts, council tax arrears etc. For you to be eligible for an IVA, you must owe more than one creditor or have two or more lines of credit such as an overdraft and a credit card.
3. Inability to cancel your IVA
An IVA is a legally binding document that enables you to clear your debts within 5 to 6 years in a payment structure that best suits you while allowing you to keep your assets.
IVAs clearly have their positive and negatives and it it down to you to understand the ins and outs of an IVA as a debt solution – it might not suit your needs but there are other debt solutions available that might.
Flexible debt solutions works as an intermediary. If you are looking to apply for an IVA through our site, we will assess your credentials and pass you onto a debt specialist suited to your needs – who will pay us a fee on introduction.