Learn More About an IVA

IVA Pros and Cons

Considering an IVA? To help ensure you make an informed decsion learn more about the advantages and disadvantages of an IVA.

If you have any further questions, check our IVA FAQ’s or call us today on 0800 083 1433.

IVA Pros

• Private individuals on their own or with a partner, and sole traders can all qualify for an IVA. So can people in certain positions and professions who are not allowed to be made bankrupt.
• It is a legally binding agreement which means you will be protected from further action by your creditors.
• You can safeguard your property from unsecured creditors (unlike in bankruptcy).
• The IVA normally runs for five years.
• It runs for a fixed period (usually for five years), but sometimes less if people’s circumstances change for the better.
• In an IVA all you pay is the amount you can realistically afford, each month for the period of your arrangement (usually 60 months), and that is literally all you have to pay as long as you keep up the payments. In return, your creditors agree to write off the debt you can’t afford to repay and pay our fee out of the payments you have made to them.
• You are allowed to open a regular bank account with no overdraft facility so you are in control of your finances.
• Payments are calculated to be affordable; whilst in an IVA your home is protected from legal action and unsecured creditors cannot force you to sell it.

IVA Cons

• If your total unsecured debt (e.g. credit cards, loans, etc but excluding mortgage if you have one) is less than £12,000 an IVA is unlikely to be suitable.
• If you fail to keep to the terms of the IVA your creditors can resume collection actions.
• If you have equity in your house (i.e. it is worth more than you paid for it) you will have to make best endeavours to remortgage towards the end of your IVA and release funds to your creditors. Don’t forget, your creditors are still writing off the debt you can’t afford to repay and the alternative could well be bankruptcy whereby you could lose your property altogether.
• The IVA normally stays on your credit history for one year after your IVA ends. This may affect your credit rating although some lenders view your proven ability to make regular payments over 60 months favourably.
• In some cases it could run for six years (approximately 5% of cases).
• You are not allowed to borrow during your IVA.
• IVA fees come out of the payments you make to us. If the IVA fails, your creditors will be able to pursue you for the full outstanding balance and no credit will be given in relation to any payments for fees within the IVA. Failure could also result in bankruptcy.
• If you have equity in your home you may be required to release it to your creditors. This is usually achieved by increasing the level of your mortgage towards the end of your IVA. If this is not possible you are likely to be required to extend your IVA payments by up to an extra 12 months.

If you think an IVA may be right for you or want to find out about other solutions call us on 0800 083 1433.