Entering into an Individual Voluntary Arrangement (IVA) is one of those financial moves that is associated with pros and cons. For certain people that are having problems with their debts, an Individual Voluntary Arrangement can turn out to be a close to ideal solution.
But for others, an IVA is not always the ideal option. Keep reading to learn more here. To assist you with understanding how an IVA works and to decide if an IVA might be the best option for your current needs, here is our list of the most important pros and cons they offer.
Individual Voluntary Arrangement: The Pros
- You can use an IVA to settle the debts you owe by only repaying a portion of the amount that is owed. Many creditors agree to IVAs since you will end up paying back a percentage that is larger in comparison to when you declare bankruptcy.
- An Individual Voluntary Arrangement provides you with a clear schedule to clear your debts. Once you complete the arrangement, you are given the opportunity to start afresh free from debts that no longer weigh you down.
- You won’t have to deal with those nerve-wracking calls from creditors. An IVA is legally and comprehensively binding, which means all your creditors will not be permitted to go after legal action, nor attempt to demand that you need to repay them. However, it is important to know that the creditors need to first consent to the IVA terms for this to actually come into effect. This means securing positive votes from several of your creditors which translates to a minimum of 75% of all your debt.
- An IVA allows you to hold onto your residential property. But it is important to note that an IVA might mean you will need to use equity for any of your unsecured creditors in the way of refinancing an existing mortgage or remortgaging your property. Consult with one of our advisors if you need more information about this.
- An Individual Voluntary Arrangement is affordable. Since the “Arrangement” matches your unique situation, the payments that you will be making monthly are based on your current expenses and income. In this way, your IVA can match your budget.
- An IVA can stop penalty fees, charges, and interest from accumulating from unsecured debts. This can make it easier to focus on your repayments.
- An IVA provides you with consistent financial guidance. We are here to provide you with support through every step of your IVA process, and we have a support team to address any of your concerns and answer any questions you might have such as IVA and inheritance.
Individual Voluntary Arrangement: The Cons
- Even though the majority of the IVAs that we have proposed are acceptable, putting the IVA into force will necessitate the approval of your creditors. This means we are not able to ensure you will be able to secure an IVA.
- You will be bound legally to adhere to the IVA terms. Even though the payments that you are required to make monthly are realistic, you should forget about accumulating any surplus funds until you have completed the “Arrangement”.
- An IVA will impact your credit rating or score. An IVA will appear on your record for at least six years. This is accounted for from when the arrangement takes effect. If the “Arrangement” ends before this period, you can still expect your credit score to be negatively impacted until the 6 years come to an end.
- Every IVA is recorded on the Individual Insolvency Service register.
- You will be liable for added fees to the IVA provider you have used. However, these fees are usually incorporated into your primary IVA payments.