IVA – Pros and Cons

pros and cons of an iva
PROS
  • Reduced repayments – Your appointed IVA specialist will work out what you can afford to pay each month and submit this figure to your creditors. As no further interest is accrued this means you have peace of mind that your monthly payments will be affordable.
  • Be debt free –An IVA usually lasts for 5 years. After you have made your payments for 5 years you will be debt free. Your creditors can’t change their mind or renegotiate the deal.
  • Protect your house and assets – With an IVA you won’t have to sell your house or any of your belongings. Your creditors will not be able to touch anything you own.
  • No Court action – An IVA is a legal agreement so the people you owe money to will not be able to use the courts to chase for money. There is no court hearing to establish an IVA, it is all done by completing a few forms (which your IVA Practitioner will do on your behalf)
  • Freeze your debts– No more monthly interest and late payment charges. Once you agree an IVA, the amount you pay is set.
  • No more stressful phone calls – Once you have entered an IVA, your creditors will no longer be able to contact you directly. They can only communicate with you via your Insolvency Practitioner
  • Protect your reputation – Unlike bankruptcy, an IVA is not made public record nor is your tax code changed; allowing you to prevent others such as employees from knowing about your financial situation
CONS
  • Credit Score – When you take out an IVA your credit rating will be affected for 6 years making it difficult for you to be approved for credit during this time. (Your credit score is already probably not great if you need an IVA so this may not be a major consideration)
  • Unexpected Income – Whilst under an IVA if you receive some unexpected money (You inherit or win the lottery) you must declare it to you IVA Practitioner and you may be required to pay it to your creditors
  • Yearly reviews– Every year your IVA practitioner will contact you and ask if your financial situation has changed (eg you have a had a significant pay rise, changed jobs etc). You will be legally bound to increase your payments if you can afford to
  • Banking restrictions – During the IVA you will only be allowed a basic bank account – preventing you from having an account with an overdraft, as well as a credit card or cheque book
  • You cant default on an IVA – Because an IVA is a legal agreement between you and your creditors, you cannot simply stop paying. You could be made bankrupt if you do.
  • Spending restrictions – You IVA specialist will calculate what you can afford to pay and leave you with enough money each month to live – but you will be expected to live a modest life-style.

Find a local IVA/Insolvency Practitioner below

      To get an IVA, you should have some spare income each month to pay your creditors, usually at least £100. Your creditors are unlikely to accept an IVA if your payments are less than that.

      However, an IVA can be flexible depending on your needs and circumstances. For example, if you don’t have much spare money from your monthly income but do have something that you can sell to raise a lump sum, you may be able to pay your creditors with the lump sum.

      If you decide an IVA is right for you, your insolvency practitioner will advise you on what payments to make and how you might be able to increase your spare monthly income.

      An IVA will normally only be right for you if you have a regular and predictable income. This is because an IVA depends on you making monthly payments to your creditors over a period of a few years. If your income changes from month to month, an IVA may not be right for you.

      Before you decide on an IVA, complete a budget to see what spare income you have each month.

      If you decide that an IVA is right for you, your insolvency practitioner will need a copy of your budget.