What are the advantages and disadvantages of an IVA?

IVA Advantages

• Debt Free
  An IVA lasts for a fixed period of time, normally no longer than 5 years, so after this time you could be debt free.


• Payment Demands Stopped
  Once the IVA is agreed, your creditors are bound by the agreement and by law are unable to demand payments from you either by telephone or letter.


• Interest and Charges Frozen
  Once the IVA is approved, creditors cannot add further charges or interest on to any of your accounts covered by the agreement by law.


• Single Monthly Payment
  At the beginning of the arrangement, you agree an affordable monthly payment with your creditors. In some cases, proposals may be based on payment of a one-off lump sum.


• Repaired Credit Rating
  Once you have successfully completed your arrangement, you are issued with a Certificate of Completion. This will have a beneficial effect on your credit rating.


• Fixed, Legally Binding Agreement
  The IVA is legally binding on you and all your creditors. You will know exactly where you stand and how long it will take before you are debt free.


• Protection from legal action
  Once approved, creditors bound by an IVA are not allowed to take any further legal action against you as long as you meet the terms of the arrangement.


• A Private Agreement
  An IVA is a private matter between yourself and your creditors. Unlike bankruptcy, there will not be public notice in the local papers.


• Professional Status Unaffected
  You can continue in your current profession (e.g. doctor, solicitor or accountant) whilst undertaking an IVA without any adverse effects to your job.


• Ability to hold public office unaffected
  An Individual Voluntary Arrangement does not affect your ability to hold public office.


• Lower fees
  IVA fees tend to be less in comparison to the court costs and Official Receiver fees involved in a bankruptcy.
  

IVA Disadvantages

• Possible Release of Equity in your Home
  If there is any equity in your property or any other significantly valuable asset, you may be required to release some or all of this as part of the IVA agreement.


• Minimum Level of Debt
  Normally an IVA is only suitable for people with a minimum level of unsecured debt around £15,000 or more. Additionally, you will need to be able to afford a monthly payment of at least £200.


• No Unsecured Borrowing while the Arrangement is in place
  You will not be able to obtain and use store or credit cards. Any cards you have at the time the IVA is approved must be cut up and returned to the financial institution which issued them. However, it may be possible to change an existing mortgage or apply for a new one while you are in an IVA. Your IP can advise you on this.


• Monthly Payments must be affordable
  IVAs are only suitable if you or another person can afford the monthly repayments to your creditors.


• Creditors must agree
  Your creditors have to agree on the arrangement through a vote.


• You must maintain your monthly payments
  If you do not make your regular payments to the IVA it is likely that the Arrangement will fail and your creditors will be at liberty to take other action against you. It may also result in your bankruptcy.

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