The Pros and Cons of an IVA

For those people with a serious amount of debt, they may be considering an IVA (individual voluntary arrangement). There are a number of IVA questions to consider before going ahead.

What is an IVA?

An IVA is a legally binding agreement between you and your creditors. It’s a way to clear your debts without needing to declare bankruptcy.  The IVA is a contract between you and your creditors which sets up a repayment schedule for you to adhere to. The repayment is worked out on how much you can afford to pay each month, and for simplicity, you only make one monthly payment, rather than paying each creditor separately.

An IVA usually runs for a period of 60 months or five years. The terms of the IVA are agreed before it is drawn up and cannot be altered once all the creditors have agreed to it.

The advantage of an IVA over bankruptcy is that you are not obliged to sell your assets, it isn’t published in the local newspaper and it doesn’t affect your professional status.

Who has an IVA?

IVAs aren’t suitable for everyone. It’s important to get independent financial advice before you go ahead and agree to an IVA. Drawing up an IVA is a legal process and is governed by the court.

An IVA is usually for someone who has a regular salary and has more than £10,000 of debt owing to a minimum of two creditors.

What are the disadvantages of an IVA?

The disadvantage of having an IVA is that it is published on the ‘Individual Insolvency Register’ which is available for viewing to members of the public. An IVA will also show on your credit report for up to six years. It may be that some of your property equity may have to be released as part of the deal and if you start to earn more than when you took the IVA out, your repayments may be increased to reflect the rise in your salary.

After you’ve had an IVA it’s unlikely that you would be able to get further unsecured borrowing.

How do you get an IVA?

You need to speak to an IVA advisor to find out if you qualify and if this is the best solution for you. The application process takes a number of weeks and needs acceptance by your creditors before it can be drawn up.

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