Is an IVA right for me?

This is a really tough question and one no person can answer without all the information at hand, it really depends on an inviduals circumstances. Only after going through the application and getting an IVA practitioner to look at your own personal case will you know if it really is right for you. What we can do is tell you the advantages and disadvantages of an IVA below.

Speak To An IVA Practitioner

Each IVA case is completely different and this is why its so important to make an application and get an Insovency Practitioner to look at your individual case. It wont cost you a penny to make an application and go through the process of finding out if an IVA is right for you. Remember this isn’t like applying for a loan, the insolvency practitioner is here to help you, they are confidential and completely understanding to your current situation. If they believe an IVA is right for you then they will put the case forward to your creditors if you decide that is the route you want to go down. If they believe an IVA case won’t go through, they will advise a different route like debt management plan, Debt relief order or bankruptcy. This all just advice at this stage, you don’t have to follow what is advised if you dont want to and no pressure will be put on you to use any solution.

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IVA Advantages

You only pay one monthly affordable payment – Your day to day living costs will be taken into account before the payment to your IVA.

Creditors cannot harass you for payment – Once creditors have agreed to your IVA proposal, they are legally bound by the arrangement and can no longer contact you directly to request payment. However, you will have to deal with your Insolvency Practitioner and their staff who will administer the IVA and will deal with creditors on your behalf.

It protects your assets – Assets such as your home or vehicle are usually protected during an IVA, meaning that you are able to retain these, provided they are of a reasonable value.

Write off unaffordable debt – Once you’ve made your final payment any remaining unsecured is written off and your creditors can’t pursue you for payments

A fixed, reliable payment – You will make an affordable repayment to your debts in the knowledge that your debt amount is fixed. Creditors cannot make additional charges or add more interest to your debts once the IVA is approved.

Interest rates and charges are frozen – Once the IVA is approved by creditors interest and charges are frozen and cannot be added to the debts by your creditors. This helps prevent the debt from increasing further.

Protection from bailiffs and other legal action – As long as you stick to the terms of your IVA, creditors are not allowed to take legal action against you. This includes sending bailiffs to reclaim debt.

If you’re a homeowner you’ll usually be able to keep your home – as long as you maintain the mortgage payments and any secured loans on your property

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IVA Disadvantages

Your credit rating will be affected – An IVA will negatively impact your credit rating. An IVA will be registered on your credit file and will usually remain there for six years from the date of approval. As an IVA usually lasts for five years, it means that is it likely to remain on your credit file for a further year after successfully completing the IVA.

You will need to follow a strict budget – Payments to the IVA must be made. Although the agreement is somewhat flexible, you will need to budget for the next few years to ensure that you continue making repayments.

If you’re a homeowner, you may need to release equity from your home – You may be required to release equity from your home as part of the agreement. If this isn’t possible, the length of your IVA might increase from five years to six

An IVA is not private – Once an IVA is approved by creditors, it is listed on a public database called the Insolvency Register. This is searchable by anyone. Although, in practice, few people are actually going to use this system.

If your financial situation improves – you might be required to increase your payments in line with your income.

If you earn substantial overtime or bonuses – you might be required to pay a portion into your IVA to uphold repayments aligned to your income levels.

75% of creditors need to agree – For an IVA to be successful 75% of your creditors need to accept the proposal, this is based on debt amount to each creditor not amount of creditors. For example if you have 3 creditors and a total debt of £10,000 between the 3 creditors and two creditors who you owe £8000 (80%) to in total accept the IVA but the third creditor who you owe the remaining £2000 (20%) to rejects the proposal, the IVA will legally have to be accpepted by the third creditor as they aren’t owed 25% or more of the total debt.

The hardest part of dealing with debt is often recognising there is a problem and asking for help, once you’ve spoken to an advisor, your mind will put at rest and the stress of dealing with your debt will be gone for good”